Health Insurance Exchanges Under the Patient Protection and Affordable Care Act (ACA)

Bernadette Fernandez
Specialist in Health Care Financing

Annie L. Mach
Analyst in Health Care Financing

The fundamental purpose of a health insurance exchange is to provide a structured marketplace for the sale and purchase of health insurance. The authority and responsibilities of an exchange may vary, depending on statutory or other requirements for its establishment and structure. The Patient Protection and Affordable Care Act (ACA, P.L. 111-148, as amended) requires health insurance exchanges to be established in every state by January 1, 2014. ACA provides certain requirements for the establishment of exchanges, while leaving other choices to be made by the states.

Qualified individuals and small businesses will be able to purchase private health insurance through exchanges. Insurers selling health insurance plans through an exchange will have to follow certain rules, such as meeting the private market reform requirements in ACA. While the fundamental purpose of the exchanges will be to facilitate the offer and purchase of health insurance, nothing in the law prohibits qualified individuals, qualified employers, and insurance carriers from participating in the health insurance market outside of exchanges. Moreover, ACA explicitly states that enrollment in exchanges is voluntary and no individual may be compelled to enroll in exchange coverage.

Exchanges may be established either by the state itself as a “state exchange” or by the Secretary of Health and Human Services (HHS) as a “federally facilitated exchange.” All exchanges are required to carry out many of the same functions and adhere to many of the same standards, although there are important differences between the types of exchanges. States will need to declare their intentions to establish their own exchanges by no later than November 16, 2012.

ACA and regulations require exchanges to carry out a number of different functions. The primary functions relate to determining eligibility and enrolling individuals in appropriate plans, plan management, consumer assistance and accountability, and financial management. ACA gives various federal agencies, primarily HHS, responsibilities relating to the general operation of exchanges. Federal agencies are generally responsible for promulgating regulations, creating criteria and systems, and awarding grants to states to help them create and implement exchanges.

In general, health plans offered through exchanges will provide comprehensive coverage and meet all applicable private market reforms specified in ACA. Most exchange plans will provide coverage for “essential health benefits,” at minimum; be subject to certain limits on cost-sharing, including out-of-pocket costs; and meet one of four levels of plan generosity based on actuarial value. To make exchange coverage more affordable, certain individuals will receive premium assistance in the form of federal tax credits. Moreover, some recipients of premium credits may also receive subsidies toward cost-sharing expenses.

A state that is approved to operate its own exchange has a number of operational decisions to make, including decisions related to organizational structure (governmental agency or a nonprofit entity); types of exchanges (separate individual and Small Business Health Options Program (SHOP) exchanges, or a merged exchange); collaboration (a state may independently operate an exchange or enter into contracts with other states); service area (a state may establish one or more subsidiary exchanges in the state if each exchange serves a geographically distinct area and meets certain size requirements); contracted services (an exchange may contract with certain entities to carry out one or more responsibilities of the exchange); and governance (governing board and standards of conduct). This report outlines the required minimum functions of exchanges, and explains how exchanges are expected to be established and administered under ACA. The coverage offered through exchanges is discussed, and the report concludes with a discussion of how exchanges will interact with selected other ACA provisions.


Date of Report: August 15, 2012
Number of Pages: 36
Order Number: R42663
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Affordable Care Act: Litigation Resources

Eva M. Tarnay
Law Librarian

In March 2010, Congress passed P.L. 111-148, the Patient Protection and Affordable Care Act of 2010 (PPACA), and amended it by passing P.L. 111-152, the Health Care and Education Reconciliation Act of 2010 (HCERA). Subsequently, lawsuits were filed in multiple courts challenging various aspects of the new law. Many of these cases were heard in the district courts and a few were appealed to appellate courts. In November 2011, the Supreme Court granted three petitions for certiorari in one of these cases. On June 28, 2012, the Court issued its decision in the case, National Federation of Independent Business et al. v. Sebelius. 

This report contains resources for retrieving background information and selected legal material relevant to these cases. It also includes information on CRS experts and products to assist in understanding the legal and policy issues related to the act.


Date of Report: August 9, 2012
Number of Pages: 13
Order Number: R42437
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Medicare’s Skilled Nursing Facility Primer: Benefit Basics and Issues

Scott R. Talaga
Analyst in Health Care Financing

A Medicare skilled nursing facility (SNF) is an institution, or distinct part of an institution (e.g., building, floor, wing), that provides post-acute skilled nursing care and/or skilled rehabilitation services, has in effect a written agreement to transfer patients between one or more hospitals and the SNF, and is certified by Medicare. In general, “skilled” nursing and rehabilitative care are services ordered by a physician that require the skills of professional personnel (i.e., registered nurse, physical therapist) and are provided under the supervision of such personnel.

The Medicare SNF benefit has drawn attention due to the rapid increase in SNF expenditures. In 2010, Medicare Parts A and B payments to SNF providers totaled $27.4 billion, having grown at an average annual rate of 9.9% since 2000. SNF payment reductions have been recommended by various deficit reduction groups. Some of the recommendations have included reducing the SNF reimbursement rate and reducing or eliminating Medicare bad debt reimbursement.

Given the beneficiary has met certain requirements, a Medicare beneficiary is entitled to 100 days of SNF care for each Medicare-covered SNF stay. To be eligible for SNF coverage, a Medicare beneficiary must have been an inpatient of a hospital for at least 3 consecutive calendar days and transferred to a participating SNF usually within 30 days after discharge from the hospital. Beneficiaries must also receive treatment at the SNF for a condition they were receiving treatment for during their qualifying hospital stay (or for an additional condition that arose while in the SNF). For the first 20 days of SNF coverage, Medicare beneficiaries have no copayment. Medicare beneficiaries have a daily SNF copayment for the 21st through the 100th day indexed annually at one-eighth (12.5 percent) of the current Part A deductible. For 2012, the daily copayment is $144.50.

SNFs are reimbursed under a prospective payment system (PPS), which began on July 1, 1998. The PPS reimbursement is a per diem “per day” amount that covers most costs of furnishing SNF services to Medicare beneficiaries. With the exception of certain high-cost ancillary services, the SNF PPS bundles covered-SNF services into a single per diem reimbursement rather than Medicare paying for each service individually.

This report describes the Medicare SNF benefit and the reimbursement system for SNF services. In addition, this report describes recent issues, as well as congressional and other proposals designed to slow the growth of Medicare SNF expenditures.


Date of Report: August 8, 2012
Number of Pages: 19
Order Number: R42401
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Medicaid: A Primer

Elicia J. Herz
Specialist in Health Care Financing

In existence for 47 years, Medicaid is a means-tested entitlement program that financed the delivery of primary and acute medical services as well as long-term care to more than 69 million people in FY2011. The estimated annual cost to the federal and state governments was roughly $404 billion in FY2010. In comparison, the Medicare program provided health care benefits to nearly 48 million seniors and certain persons with disabilities, and cost roughly $523 billion in FY2010. Because Medicaid represents a large component of federal mandatory spending, Congress is likely to continue its oversight of Medicaid’s eligibility, benefits, and costs.

Understanding the complex statutory and regulatory rules that govern Medicaid is further complicated by the fact that each state designs and administers its own version of the program under broad federal rules. State variability is the rule rather than the exception in terms of eligibility levels, covered services, and how those services are reimbursed and delivered. The Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) makes both mandatory and optional changes to Medicaid along some of these dimensions.

This report describes the basic elements of Medicaid, focusing on the federal rules governing who is eligible, what services are covered, how the program is financed, and how beneficiaries share in the cost of care, how providers are paid, and the role of special waivers in expanding eligibility and modifying benefits. Examples of both mandatory and optional eligibility groups and benefits as defined in the federal statute are described. Basic program statistics are also provided. Finally, selected legislative changes at the federal level via the ACA, and the Supreme Court decision in National Federation of Independent Business v. Sebelius announced on June 28, 2012, that affect Medicaid in significant ways are also described.


Date of Report: August 7, 2012
Number of Pages: 19
Order Number: RL33202
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Traditional Versus Benchmark Benefits Under Medicaid

Elicia J. Herz
Specialist in Health Care Financing

The Medicaid program, which served 69 million people in FY2011, finances the delivery of a wide variety of preventive, primary and acute care services as well as long-term services and supports for certain low-income populations. Benefits are available to beneficiaries through two avenues. First, the traditional Medicaid program covers a wide variety of mandatory services (e.g., inpatient hospital services, lab/x-ray services, physician care, nursing facility care for persons aged 21 and over) and other services at state option (e.g., prescribed drugs, physiciandirected clinic services, physical therapy, prosthetic devices) to the majority of Medicaid beneficiaries across the United States. Within broad federal guidelines, states define the amount, duration, and scope of these benefits. Thus, even mandatory services are not identical from stateto- state.

The Deficit Reduction Act of 2005 (DRA; P.L. 109-171) created an alternative benefit structure for Medicaid. Under this authority, states may enroll certain Medicaid subpopulations into benchmark benefit plans that include four choices: (1) the standard Blue Cross/Blue Shield preferred provider plan under the Federal Employees Health Benefits Program, (2) a plan offered to state employees, (3) the largest commercial health maintenance organization in the state, and (4) other coverage appropriate for the targeted population, subject to approval by the Secretary of Health and Human Services (HHS).

Since the enactment of the Patient Protection and Affordable Care Act in 2010 (ACA; P.L. 111- 148, as amended), benchmark benefits have taken on a new importance in the Medicaid program. As per the ACA, a new mandatory group of non-elderly, non-pregnant adults with income up to 133% of the federal poverty level will be eligible for Medicaid beginning in 2014, or sooner at state option. (For more information about a recent Supreme Court ruling regarding this group, see CRS Report RL33202, Medicaid: A Primer.) These individuals will be required to enroll in benchmark plans rather than traditional Medicaid (with some exceptions for subgroups with special medical needs). However, to date, only a handful of states have experience administering these plans, nearly all of which have been tailored to specific subpopulations.

The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) estimated that coverage expansion provisions in the ACA would increase enrollment by about 7 million in FY2014, rising to 11 million by FY2022 in both the Medicaid and the State Children’s Health Insurance Programs (Congressional Budget Office, Estimates for the Insurance Coverage Provisions of the Affordable Care Act Updated for the Recent Supreme Court Decision, July 2012). Many of these new enrollees will get benchmark benefits. To assist Congress in evaluating the current scope of benefits available under Medicaid, this report outlines the major rules that govern and define both traditional Medicaid and benchmark benefits. It also compares the similarities and differences between these two benefit package designs.


Date of Report: August 3, 2012
Number of Pages: 16
Order Number: R42478
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District of Columbia: A Brief Review of Provisions in District of Columbia Appropriations Acts Restricting the Funding of Abortion Services

Eugene Boyd
Analyst in Federalism and Economic Development Policy

The public funding of abortion services for District of Columbia residents is a perennial issue debated by Congress during its annual deliberations on District of Columbia appropriations. District officials have cited the prohibition on the use of District funds as another example of congressional intrusion into local matters. Since 1979, with the passage of the District of Columbia Appropriations Act of 1980, P.L. 96-93 (93 Stat. 719), Congress has placed some limitation or prohibition on the use of public (federal or District) funds for abortion services for District residents. For instance, when Congress passed and the President signed the District of Columbia Appropriations Act of FY2010, the city was allowed to use its own funds, but not federal funds, for such services.

Subsequently, in public laws appropriating funds for the District of Columbia for FY2011 and FY2012, Congress included provisions prohibiting the use of both District and federal funds for abortion services, except in cases of rape, incest, or when the life of the mother was endangered. In an effort to reach final agreement on a FY2011 budget, in order to avert a government-wide shutdown, the Obama Administration and Senate and House leaders agreed to include a provision in H.R. 1473, a bill making full year appropriations for FY2011, prohibiting the District of Columbia from using federal and District of Columbia raised funds for abortion services, except in cases of rape, incest, or when the mother’s life was endangered. The inclusion of the provision generated protest by city officials on the grounds that the restriction on the use of city funds is a violation of home rule. The bill, including the abortion services provision, was signed into law on April 15, 2011, as P.L. 112-10. Congress continued this prohibition on the use of District and federal funds for abortion services with the enactment of the Consolidated Appropriations Act for FY2012, P.L. 112-74, which was signed by the President on December 23, 2011.

The authority for congressional review and approval of the District of Columbia’s budget is derived from the Constitution and the District of Columbia Self-Government and Government Reorganization Act of 1973 (Home Rule Act). The Constitution gives Congress the power to “exercise exclusive Legislation in all Cases whatsoever” pertaining to the District of Columbia. In 1973, Congress granted the city limited home rule authority and empowered citizens of the District to elect a mayor and city council. However, Congress retained the authority to review and approve all District laws, including the District’s annual budget.

This report includes a brief overview of the District of Columbia appropriations process and a discussion of the current debate and legislative history of the abortion provisions included in District of Columbia appropriations acts.


Date of Report: July 1, 2012
Number of Pages: 9
Order Number: R41772
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