Research & Commentary: HHS Final Exchange Rules

Published April 4, 2012

As states have been debating whether to implement a health insurance exchange, a key deterrent has been that the U.S. Department of Health and Human Services had released only draft rules. HHS now has released final insurance exchange rules, and many states are left with questions unanswered or suspicions confirmed.

According to HHS Secretary Kathleen Sebelius, the new rules “give States the flexibility they need to design an Exchange that works for them.” Health insurance exchange advocates also say the new rules will guide exchanges to create competition and lower costs.

Exchange opponents, however, say the new rules give states no more flexibility than the HHS draft rules. Under the final rules, Sebelius still will only approve a state’s exchange if “all minimum” federal requirements are met, and “an exchange may not establish rules that conflict with or prevent the application of exchange regulations promulgated by HHS.” Opponents say state flexibility is so limited a “state” exchange is really just a state-run federal exchange.

This is confirmed by wording in the final rules indicating the federal government is in sole control of these state-federal “partnerships”: “The Affordable Care Act does not contemplate divided authority over an Exchange. In all organizations of a federally-facilitated exchange, the Secretary will retain ultimate responsibility and authority over operations and all inherently governmental functions. A State wishing to enter into a Partnership must agree to perform the function(s) within certain parameters, as agreed upon by the State and HHS.”

In addition, the final rules give no information regarding how a federally run exchange would function or how it would be funded.

The following documents offer additional information on the final rules and health insurance exchanges.

Patient Protection and Affordable Care Act; Establishment of Exchanges and Qualified Health Plans; Exchange Standards for Employers
The official report from the U.S. Department of Health and Human Services outlines the rules and regulations for state health insurance exchanges.

Obamacare and Abortion: New Rules Further Burden Conscience
Sarah Torre of The Heritage Foundation explains how the new HHS insurance exchange rules may force private citizens to fund abortions.

Costs Hold Back State Health Insurance Exchanges
A KPMG poll reveals the factors holding back states from implementing health insurance exchanges, including costs, political ideology, and the uncertain future of the Patient Protection and Affordable Care Act.

State Insurance Exchanges: The Case Against Implementation
Benjamin Domenech, a research fellow of The Heartland Institute and managing editor of its Health Care News, discusses several reasons why states should not implement a health insurance exchange.

Policy Tip Sheet—State Health Insurance Exchanges
Kendall Antekeier, The Heartland Institute’s legislative specialist for health care policy, outlines the arguments against state health insurance exchange implementation and offers facts about previously attempted exchanges. Antekeier writes, “If a state moves forward with implementing an exchange, it could invest valuable time and taxpayer dollars in developing a system only to discover it does not comply with final federal regulations.”

Consumer Power Report: Don’t Go Exchanging
Benjamin Domenech explains how the “threat of an instituted ‘federal’ exchange—where a state presumably would have no input during the process—is a more hollow threat than ever before.”

Research & Commentary: Lessons From Massachusetts and Utah Insurance Exchanges
This Heartland Institute Research & Commentary outlines two states’ experiences with health insurance exchanges and explains they have not produced desired results but have instead increased state health care costs. For example, Heartland Institute Senior Fellow Peter Ferrara is quoted explaining how the Massachusetts exchange increased costs by 42 percent in less than three years.

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Health Care News at, The Heartland Institute’s website at, and PolicyBot, Heartland’s free online research database at

If you have any questions about this issue or the Heartland Web site, contact Heartland Institute Health Care Legislative Specialist Kendall Antekeier at [email protected] or 312/377-4000.