DISTRICT HBX: A CAPITOL DEBATE Kim T. Le, Associate Nelson Mullins Riley & Scarborough LLP

BRIEF OVERVIEW

Background To ensure the smooth and rapid implementation of health reform in the District, a Health Reform Implementation Committee (HRIC) was established by Mayors Order to oversee the execution of the federal Patient Protection and Affordable Care Act (ACA. The DC Health Benefit Exchange Authority (HBX) was established to implement a healthcare exchange program that ensures access to quality, affordable healthcare for all DC residents. In October 2012, the HBX Executive Board voted unanimously to create a single marketplace for the sale of individual coverage and small group coverage. The Board took this action in order to increase: Price competition and consumer choice, Competition for customers amongst insurers, and Efficiency, by reducing administrative costs. 3

Ensuring A Diverse Risk Pool The District faces a unique demographic challenge in guaranteeing the long-term viability of the HBX insurance marketplace. We have a relatively small population and a low level of uninsured. Of the approx. 42,000 uninsured District residents, 10,416 have incomes above 401% FPL; nearly half are Young Invincibles (18- 34). One of the vital elements of establishing a sustainable and successful Exchange is a sizable and diverse pool of participants. With such a small market of subsidy-eligible uninsureds, it is vital for the HBX to capture this low-risk population. Consolidating small group and individual health insurance markets under the HBX virtually assures a robust and diverse risk pool, in addition to the critical mass needed to sustain the HBX financially. 4

THE MANDATE

Private Market Closed On June 04, 2013, the D.C. Council passed temporary stop-gap legislationthe "Better Prices, Better Quality, Better Choices for Health Coverage Amendment"requiring small businesses to purchase health insurance through the HBX. More technically, the Amendment modifies the HBX Establishment Act (D.C. Code Title 31, Section ) to require all insurance carriers offering individual or small group benefit plans to offer such plans solely through the HBXeliminating the private market. The stop-gap legislation will expire in October Next spring, the Council will put forth a permanent billat which time, the mandate debate will likely reemerge. Representatives from the insurance industry pressed the D.C. Council to delay the HBX mandate, but Exchange officials and health care advocates prevailed on Council members to leave the 2015 mandate in place. 6

Consumer Protections Supporters of the HBX mandate point out that state-run unified markets are critical in smaller states, where fragmentation in the markets can lead to less transparency, higher premiums, and difficulty ensuring regulatory oversight. The Council's stop-gap Amendment includes the following protections: Standardized Plans: Requires insurers to offer one or more standardized health plan in each metal level to allow for an "apples-to-apples" shopping experience. Meaningful Difference: Requires qualified health plans offered by a single insurer to be meaningfully different from one another to protect consumers from being confused or overwhelmed by a flood of "look-alike" policies. Mental Health and Addiction Parity: Ensures that treatment for mental health and/or substance abuse is on par with medical benefits. Assuring Maximum Plan Choice: The HBX will not limit the number of qualified health plans offered for purchase. Coverage of Essential Health Benefits: All qualified health plans must include the defined essential health benefits package with no substitutions. 7

JANUARY 2014 Individual plans that begin on/after Jan. 01, 2014 Small groups that are uninsured as of Dec. 31, 2013 (insured small groups may offer/renew plans for CY2014) JANUARY 2015 On or after Jan. 01, 2015, all small groups plans must be offered/renewed through the HBX. TRANSITION TIMELINE 8

Future Considerations Delay the HBX Mandate: D.C. Health Committee Chair, Yvette Alexander, supports delaying the imposition of the HBX mandate until Her amendment, if adopted by the Council, would allow businesses to evaluate whether the exchange offers better options, or lower prices. Opponents insist that such a delay would be "devastating" to the HBX. Redefine "Small Group" as <100: Small group is currently defined as <50 employees. Though the stop-gap Amendment does not address redefining small group as <100, the HRIC Insurance Subcommittee has recommended such redefinition (April 2012 Report), projecting decreased premiums for the individual market (-4.2%) and a relatively small increase for groups (+2.8% compared to a +3.6% increase). 9