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A08514 Memo:

BILL NUMBER:A8514

TITLE OF BILL:  An act to amend the public authorities law and the
public officers law, in relation to the establishment of the New York
Health Benefit Exchange

PURPOSE OF BILL:

This bill would establish the New York Health Benefit Exchange
("Exchange"), a public benefit corporation that will serve as a market-
place for the purchase and sale of qualified health plans in the State
of New York, in accordance with the Patient Protection and Affordable
Care Act, Pub. L. 111-148, and the Health Care and Education Reconcil-
iation Act, Pub. L. 111- 152, collectively referred to as the "Afforda-
ble Care Act" ("ACA").

SUMMARY OF PROVISIONS:

Section 1 of the bill would provide that the bill, upon enactment, would
be known as the "New York Health Benefit Exchange Act."

Section 2 of the bill would add new Public Authorities Law ("PAL") Arti-
cle 10-E to establish the Exchange as a public benefit corporation.

New PAL S 3980 would set forth a statement of policy and purposes.

New PAL S 3981 would define certain key terms.

New PAL S 3982 would establish the Exchange as a public benefit corpo-
ration to be managed by a Board of Directors ("Board"). The Board would
consist of nine directors, including two ex officio members: the Super-
intendent of Insurance (effective October 3, 2011, the Superintendent of
Financial Services) and the Commissioner of Health. Seven additional
directors, who would be required to meet the qualifications specified in
the bill, would be appointed by the Governor, two on the recommendation
of the Temporary President of the Senate and two on the recommendation
of the Speaker of the Assembly.  The chair would be appointed by the
Governor and confirmed by the Senate, and all directors would be subject
to the ethics and conflict of interest provisions set forth in Public
Officers Law ("POL") SS 73 and 74.

New PAL S 3983 would set forth the general corporate powers of the
Exchange, including the power to sue and be sued, enter into contracts,
make by-laws, and promulgate rules and regulations to carry out its
corporate purposes.

New PAL S 3984 would set forth the functions of the Exchange, including:

o making qualified health plans, including certain qualified dental
plans, available to qualified individuals and qualified employers begin-
ning on or before January 1, 2014 [new PAL S 3984(1)];

o assigning ratings to qualified health plans offered through the
Exchange in accordance with federal criteria [new PAL S 3984(2)];

o utilizing a standardized format for presenting health benefit options
in the Exchange [new PAL S 3984(3)];

o establishing enrollment periods consistent with the Insurance Law,
unless the Insurance Law conflicts with the ACA and guidance promulgated
thereunder [new PAL S 3984(4)];

o implementing procedures for the certification, recertification and
decertification of health plans as qualified health plans, consistent
with guidelines issued pursuant to ACA S 1311(c), as further detailed in
new PAL S 3985 [new PAL S 3984(5)];

o requiring that qualified health plans offer the "essential benefits"
that will be defined by the Secretary of Health and Human Services
("Secretary") pursuant to ACA S 1302(b) and any additional benefits
required under the Insurance Law, provided that the State assumes the
cost of such additional benefits [new PAL S 3984(6)];

o ensuring that insurers offering health plans through the exchange do
not charge an individual a fee or penalty for termination of coverage
[new PAL S 3984(7)];

o providing for the operation of a toll-free telephone hotline to
respond to requests for assistance [new PAL S 3984(8)];

o maintaining an Internet website through which enrollees and prospec-
tive enrollees of qualified health plans may obtain standardized compar-
ative information on such plans [new PAL S 3984(9)];

o making available by electronic means a calculator to allow individuals
to determine the actual cost of coverage after application of any avail-
able premium tax credits under Internal Revenue Code ("IRC") S 36B and
cost-sharing reductions under ACA S 1402 [new PAL S 3984(10)];

o establishing a program under which the Exchange awards grants to enti-
ties to serve as navigators under ACA S 1311(i) and associated regu-
lations [new PAL S 3984(11)];

o informing individuals of eligibility requirements for the State's
public health insurance programs (e.g., Medicaid, Child Health Plus, or
any applicable state or local public health insurance program) and, if
eligible, enrolling them in such programs [new PAL S 3984(12)];

o granting certifications attesting that, for purposes of the individual
responsibility penalty under IRC S 5000A, an individual is exempt from
the individual responsibility requirement or from the penalty pursuant
to ACA S 1411 [new PAL S 3984(13)];

o transmitting to the Secretary of the Treasury information about
certification granted to individuals and employees about individuals who
have notified the Exchange that they have changed employers, and about
individuals who ceased coverage under a qualified health plan [new PAL
3984(14)];

o providing each employer with the name of each employee of the employer
who ceased coverage under a qualified health plan, and who was deter-
mined eligible for a premium tax credit because the employer did not
offer minimum essential coverage, or because the coverage was either
unaffordable or did not provide the required minimum actuarial value
pursuant to federal law [new PAL S 3984(15)];

o operating a Small Business Health Options Program ("SHOP") pursuant to
ACA S 1311, through which qualified employers will be able to access
coverage for their employees [new PAL S 3984(16)];

o entering into agreements with federal and state agencies and other
state exchanges to carry out its responsibilities, and with local
departments of social services to coordinate enrollments in other social
services programs, provided that such agreements include adequate
protections with respect to the confidentiality of the information to be
shared and comply with all state and federal laws and regulations [new
PAL S 3984(17)];

o performing duties required by the Secretary or the Secretary of the
Treasury related to determining eligibility for premium tax credits,
reduced cost-sharing, or individual responsibility requirement
exemptions [new PAL S 3984(18)];

o meeting certain financial integrity requirements under ACA S 1313 [new
PAL S 3984(19)];

o consulting with the Regional Advisory Committees created under the
bill and with relevant stakeholders, including health care consumers who
are enrollees in health plans; individuals and entities with experience
in facilitating enrollment in health plans; representatives of small
businesses and self-employed individuals; the state Medicaid program and
local departments of social services; advocates for enrolling hard to
reach populations; health care providers; and insurers [new PAL
3984(20)];

o submitting information provided by Exchange applicants for verifica-
tion in accordance with the requirements of ACA S 1411(c) [new PAL
3984(21)];

o establishing rules and regulations as set forth in new PAL S 3983(8),
as deemed necessary by the Board, that shall not conflict with or
prevent the application of regulations promulgated by the Secretary [new
PAL S 3984(22)]; and

o determining eligibility, providing notices, and providing opportu-
nities for appeal and redetermination in accordance with the require-
ments of ACA SS 1411 and 1413 [new PAL S 3984(23)].

New PAL S 3985 would describe the Exchange's obligations with regard to
the certification of health plans and the oversight of qualified health
plans.

New PAL S 3986 would establish five Regional Advisory Committees, which
will be representative of the interests of health care consumers, small
business, the medical community and insurers. The Regional Advisory
Committees will provide advice to the Exchange, which will reflect find-
ings about regional variations regarding the availability of health
insurance coverage and other issues deemed necessary by such committees
and the Board.

New PAL S 3987 would provide that the Exchange will be financially self-
sufficient by January 1,2015, and that the Exchange will study and make
recommendations for achieving such self-sufficiency as set forth in new
PAL S 3988(5). In addition, as required by federal law, PAL S 3987 would
require the Exchange to publish on its website information about its
administrative costs. This section would also prohibit transfers of
funding from the Exchange to the General Fund or, absent an appropri-
ation, from the General Fund to the Exchange.

New PAL S 3988 would provide that the Exchange will study or cause to be
studied certain matters related to its future operations, and will
report its findings and recommendations to the Governor, the Temporary
President of the Senate and the Speaker of the Assembly. In particular,
the Exchange would, on or before April 1, 2012:

o compare the "essential benefits" identified by the Secretary to the
benefits mandated by State law and recommend whether any or all of such
State-mandated benefits should be offered through the Exchange at State
expense [new PAL S 3988(1)];

o consider issues such as whether insurers participating in the Exchange
must offer all health plans sold in the Exchange to individuals outside
of the Exchange; how to develop and implement the transitional reinsur-
ance program required under the ACA; whether to merge the individual and
small group health insurance markets for rating purposes; and whether to
increase the size of small employers from not more than 50 employees to
not more than an average of 100 employees prior to January 1, 2016 [new
PAL S 3988(2)];

o make recommendations regarding the "basic health plan program" [new
PAL S 3988(3)];

o make recommendations as to the advantages and disadvantages of the
Exchange serving as an active purchaser, a selective contractor or a
clearinghouse of insurance [new PAL S 3988(4)];

o make recommendations regarding the funding and self-sufficiency of the
Exchange [new PAL S 3988(5)];

  make recommendations regarding benchmark benefits [new PAL S 3988(6)];

o make recommendations upon the impact of the Exchange on the Healthy NY
and Family Health Plus employer partnership programs [new PAL
3988(7)];

o make recommendations on procedures under which licensed health insur-
ance producers, chambers of commerce and business associations may
enroll in the Exchange and assist individuals in applying for premium
tax credits and cost sharing reductions [new PAL . 3988(8)];

o make recommendations on the criteria for eligibility to serve as a
navigator [new PAL S 3988(9)];

o make recommendations on the role of the Exchange in decreasing dispar-
ities in health care service, including disparities on the basis of race
and ethnicity [new PAL S 3988(10)];

o make recommendations upon whether and to what extent health savings
accounts should be offered through the Exchange [new PAL S 3988(11)];
and

o make recommendations on how to integrate public health insurance
coverage with the Exchange [new PAL S 3988(12)].

In addition, on or before December 1, 2016, recommend whether to allow
large employers to participate in the Exchange beginning January 1, 2017
[new PAL S 3988(13)].

New PAL S 3989 would provide that the Exchange would be exempt from
state taxation.

New PAL S 3990 would authorize the Board to appoint employees to serve
as senior managerial staff, who would be exempt from the civil service
system; all other employees would be subject to civil service.

New PAL S 3991 would make Public Officers Law ("POL") SS 17 and 19,
regarding representation by the Attorney General and indemnification for
damages, applicable to directors, officers and employees of the
Exchange.

New PAL S 3392 would set forth language making the operation of new PAL
Article 10-E contingent on sufficient federal financial support to
establish and implement the Exchange.

New PAL S 3393 would provide that nothing in new PAL Article 10-E, and
no action taken by the Exchange, shall-be construed to preempt or super-
sede the authority of the Commissioner or the Superintendent or to
exempt insurers, insurance producers or qualified health plans from the

Insurance Law, the Public Health Law or the regulations promulgated
thereunder.

Section 3 of the bill would add new POL S 17(1)(x) to include employees
of the Exchange in the list of state employees entitled to represen-
tation by the Attorney General in civil litigation.

Section 4 of the bill would add new POL S 19(1)(j) to include employees
of the Exchange in the list of state employees entitled to indemnifica-
tion of damages awarded in a judgment or settlement.

Section 5 of the bill would provide for severability of the bill in the
event any part of it is deemed unenforceable.

Section 6 of the bill would provide that in the event the United States
Supreme Court finds the ACA unconstitutional or the United States
Congress repeals the ACA, the Legislature will convene within 180 days
of such decision or repeals to consider legislative options.

Section 7 of the bill would provide that the bill would take effect
immediately, and clarifies that the Department of Health or the Insur-
ance Department would be authorized to continue administering federal
grants already received.

EXISTING LAW:

The Affordable Care Act requires each state to either establish a state
American Health Benefit Exchange or participate in a regional exchange,
through which individuals and small groups will be able to purchase
health insurance in the form of a qualified health benefit plan. If the
state does neither, its residents will be required to participate in a
federal Health Benefit Exchange.

STATEMENT IN SUPPORT:

New York State has long been a leader in promoting access to comprehen-
sive health insurance coverage. The commitment to the health of the
people of the State, and its ongoing efforts to implement reforms that
promote the availability of affordable, quality care are consistent with
the goals of the Affordable Care Act: to reduce the number of uninsured
persons, provide a transparent and centralized marketplace for insurance
coverage, educate consumers and small businesses about their options,
and assist individuals and employees with access to programs, premium
assistance tax credits and cost-sharing reductions. To achieve those
objectives, the ACA includes provisions that, among other things, expand
eligibility for public insurance programs, transform the health insur-
ance system through the use of exchanges and other market reforms,
encourage quality and efficiency in the delivery of health care
services, and develop programs that emphasize preventive care.

The ACA requires that each state demonstrate to the federal government
the ability to operate an American Health Benefit Exchange or the feder-

al government will operate an exchange for the State. For a number of
reasons, it is critical that New York is able to design its own
exchange. First, the State is best positioned to understand the compli-
cated issues and far reaching policy ramifications of establishing and
operating a new exchange within the existing commercial insurance
market. Such consideration must encompass matters such as the ability of
insurers to compete fairly and the ability of consumers to access
affordable, quality care, and would be needlessly complicated if the
market within the exchange is regulated by the federal government while
the market outside the exchange is regulated by the State.

Second, the federal government simply will not be equipped to understand
and give appropriate consideration to the unique regional and economic
needs of New York's individual and small business health insurance
markets and the diversity of New York's population, with its ethnic,
cultural and language differences. Third, operation of the Exchange by
the State is the most certain way to ensure that consumers continue to
enjoy the important protections currently embodied in state law, such as
the assurance that older adults are not charged higher premiums on
account of their age.

Fourth, the ACA requires the Exchange to evaluate an individual's eligi-
bility for Medicaid and other public health coverage and enroll them if
eligible. This means that it will be critical to coordinate the oper-
ations of the Exchange with the State's administration of these
programs, which will achieve efficiencies and economies of scale and
help reduce Medicaid spending by the State and local governments. From
the county perspective, such spending represents a large percentage of
local budgets and accounts for a significant portion of property taxes;
accordingly, any efficiencies resulting from the State's operation of
the Exchange would inure to the benefit of local taxpayers.

For these reasons, it is essential that the State enact legislation
establishing an Exchange, and that such legislation conform to the
requirements of the ACA. Moreover, if such legislation is not enacted in
timely fashion, the State risks losing the opportunity to apply for
significant federal funding to establish the Exchange.

The purpose of this legislation is to establish a single Exchange in New
York - a centralized, customer-service oriented marketplace where indi-
viduals and small groups will be able to purchase qualified health
plans, receive eligibility and subsidy determinations, and be enrolled
in a range of coverage options, including public health coverage
programs - operated by a governmental entity with the flexibility to
meet the ambitious deadlines set by the ACA. A state that chooses to
operate its own Exchange must demonstrate to the United States Depart-
ment of Health and Human Services ("HHS") by January 1, 2013 that such
Exchange will be operational by January 1, 2014. Each Exchange must
begin accepting applications by July 1, 2013, and must be operational by
January 1, 2014.

The Exchange will be established as a public benefit corporation managed
by a Board of Directors. Seven of the nine members of the Board will
have expertise in relevant areas, including individual health care
coverage, small employer health care coverage, health benefits adminis-
tration, health care finance, public or private health care delivery
systems, and purchasing health plan coverage.  The remaining members -
the Superintendent and the Commissioner - will serve as ex officio,
voting members of the Board.

The Board will consult with five Regional Advisory Committees, comprised
of 25 representatives of stakeholders from sectors that will be impacted
by the operation of the Exchange, including health plan consumer advo-
cates, small business consumer representatives, health care providers,
agents, brokers, insurers and labor organizations. The Committees will
provide advice and recommendations to the Board reflecting findings
about regional variations regarding the availability of health insurance
coverage and other issues deemed necessary by the Committees and the
Board.

The Exchange will make available qualified health plans, including
certain qualified dental plans, to qualified individuals and employers
beginning on or before January 1, 2014 (to take effect no earlier than
such date). Under this legislation, the Exchange will implement proce-
dures for the certification, recertification and decertification of
health plans as qualified health plans. The Exchange will also assign
ratings to qualified health plans in accordance with the ACA.

The bill also provides certain protections meant to assist individuals
in using the Exchange. For example, the bill provides that the Exchange
will operate a toll-free telephone line to assist consumers and an
Internet website containing standardized comparative information on
qualified health plans. The website will feature a calculator allowing
individuals to determine the actual cost of coverage. The bill also
requires the Exchange to establish a program to award grants to entities
to serve as "navigators" to help educate consumers and facilitate
enrollment.

In addition, the Exchange will include a Small Business Health Options
Program ("SHOP"), which will assist small employers in facilitating the
enrollment of their employees in qualified health plans offered in the
group market. Until January 1,2016, a "small employer" will be defined
as an employer with an average of less than 50 employees. On January 1,
2016, the term will apply to employers with an average of up to 100
employers. Under this bill, and as permitted under federal law, the
Exchange will consider whether to expand the definition before 2016.

The ACA imposes a number of requirements regarding financial integrity,
which are reflected in the bill. In addition, because the bill creates a
new article within the Public Authorities Law, various provisions of law
that do not expressly appear in the bill will apply to the operations of
the Exchange, such as quorum requirements for Board meetings. To promote

transparency, the Exchange will be subject to the Freedom of Information
Law and Board meetings will be subject to the Open Meetings Law.

The participation of the ex officio directors on the Board is essential
to the success of the Exchange. The nature of the Exchange and the need
to integrate its functions with the regulation of the insurance markets
necessitates the close involvement of the Superintendent. The engagement
of the Commissioner is important, largely because the Exchange must work
seamlessly with Medicaid, Child Health Plus ("CHP") and other public
coverage programs, supported by a new, ACA compliant integrated eligi-
bility and enrollment system. As required by the ACA, the Exchange will
screen individuals to see if they are eligible for Medicaid or other
public coverage programs and, if they are eligible, enroll them in such
programs.

As many as one million additional people are expected to enroll in Medi-
caid or CHP as a result of the individual mandate, and one million
people are expected to enroll in the Exchange, of whom approximately 75
percent will qualify for subsidies. It is expected that large numbers of
people will transition back and forth between private health insurance
and public health insurance programs as their job statuses and incomes
change, making it particularly important to properly integrate the
Exchange with public health insurance programs, including Medicaid, CHP
and, if established, the "Basic Health Program."

This legislation also recognizes that there are additional decisions
that need to be made and implemented by certain dates, many of which
will require the introduction and enactment of additional legislation,
and establishes a framework for such decisions to be made. Specifically,
the bill requires the Exchange to conduct a study, or arrange for a
study to be conducted, on several of these discussion points, and
mandates that the Board submit a report of its findings and recommenda-
tions on each such issue to the Governor and the leaders of the Legisla-
ture by specified dates. As to certain matters, no study is necessary
and the Exchange is charged only with making recommendations.

The areas for study and review include: (1) the "essential benefits"
that will be identified by the Secretary in comparison to the benefits
mandated by current State law; (2) changes in the insurance market, such
as whether insurers participating in the Exchange must offer all health
plans sold in the Exchange to individuals outside of the Exchange, how
to implement the transitional reinsurance program, whether to merge the
individual and small group health insurance markets for rating purposes,
and whether to increase the size of small employers from not more than
an average of 50 employees to not more than an average of 100 employees
prior to 2016; (3) the "basic health plan program;" (4) whether the
Exchange should serve as an active purchaser, selective contractor or a
clearinghouse of insurance; (5) funding of the Exchange; (6) the bench-
mark benefits; and (7) whether to allow large employers to participate
in the Exchange beginning January 1, 2017.

BUDGET IMPLICATIONS:

Enactment of this bill will not have any fiscal implications during the
upcoming fiscal years. While the ACA requires each Exchange to be "self-
sustaining" by January 1, 2015, federal funds will support the planning,
implementation and operation of the Exchange through December 2014. New
York has already been selected to receive funding under an Early Innova-
tor Grant ($27 million) and an Exchange Planning Grant ($1 million),
which will help the state design and implement the necessary information
technology ("IT") infrastructure needed to operate its Exchange.

In June, DOH expects to apply for a Level 1 Establishment Grant, which
makes a year's worth of funding available to states that have made some
progress under their Exchange Planning Grant. Level 2 Establishment
Grants will provide funding through December 31, 2014 to applicants that
are further along in the establishment of an Exchange, and are dependent
on having a governance structure and the legal authority to operate the
Exchange. With the enactment of this legislation, assuming other appli-
cable criteria are met, New York will qualify to apply for such grant.

EFFECTIVE DATE:

This bill would take effect immediately.
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