42 U.S.C. § 300gg–44 — State flexibility in individual market reforms

(a) Waiver of requirements where implementation of acceptable alternative mechanism (1) In general: The federal rule in section 300gg–41 does not apply to individual-market health coverage in a state, as long as the state is using an approved substitute plan (called an "acceptable alternative mechanism"). To qualify, the mechanism must: give every eligible person a choice of health coverage; not exclude coverage for preexisting conditions; include at least one coverage option that is as good as standard comprehensive coverage sold in that state, or comparable to a standard option under the state's group or individual insurance laws; and be one of three specific types: a model law described in (c)(1), a qualified high-risk pool described in (c)(2), or another mechanism described in (c)(3). (2) Permissible forms of mechanisms: The alternative can be a public or private system — like an insurance pool or program, mandatory group conversion policies, guaranteed issue of one or more individual plans, or open enrollment by one or more insurers — or any combination of these, as long as it's designed to give individuals in that state's individual market access to health benefits. (b) Application of acceptable alternative mechanisms (1) Presumption (A) In general: A state is presumed to have an acceptable alternative mechanism starting July 1, 1997, if by April 1, 1997 the state's chief executive officer tells the Secretary the state has enacted or intends to enact, by January 1, 1998 (or July 1, 1998 for states described in (B)(ii)), the law needed to implement a mechanism reasonably designed to be acceptable, and gives the Secretary the information needed to review it. (B) Delay permitted for certain States (i) Effect of delay: For a state described in clause (ii) that already gave notice under (A)(i), to keep the presumption going after July 1, 1998, its chief executive officer must, by April 1, 1998, notify the Secretary that the state has enacted the needed legislation for a mechanism reasonably designed to be acceptable as of July 1, 1998, and supply the review information. (ii) States described: This delay applies to a state whose legislature does not meet within the 12-month period beginning August 21, 1996. (C) Continued application: To keep the presumption, the state must give the Secretary the same review information every three years. (2) Notice: If the Secretary finds, after reviewing that information and consulting the state's chief executive officer and insurance commissioner, that the mechanism isn't acceptable or isn't being implemented, the Secretary must (A) notify the state of that preliminary finding and of what happens under paragraph (3) if the state doesn't fix it, and (B) give the state a reasonable chance to modify or replace the mechanism so it can qualify, or to actually implement it. (3) Final determination: If, after that notice and chance, the Secretary still finds the mechanism doesn't qualify or isn't being implemented, the Secretary must notify the state that it's no longer considered to have an acceptable alternative mechanism, and that the section 300gg–41 requirements now apply to that state's individual-market coverage, starting on a date the Secretary specifies. (4) Limitation on secretarial authority: The Secretary can only make a finding under (2) or (3) on the ground that the mechanism isn't acceptable or isn't being implemented — no other ground is allowed. (5) Future adoption of mechanisms: If a state submits its notice and information after January 1, 1997, the mechanism is treated as acceptable, effective 90 days after the Secretary's 90-day review period ends, unless the Secretary makes a rejecting finding under paragraph (3) within that same 90-day period. (c) Provision related to risk (1) Adoption of NAIC models: The "model act" referred to in (a)(1)(D)(i) means the NAIC's Small Employer and Individual Health Insurance Availability Model Act (the parts that apply to individual coverage) or the NAIC's Individual Health Insurance Portability Model Act, both adopted June 3, 1996. (2) Qualified high risk pool: For (a)(1)(D)(ii), a "qualified high risk pool" is a high-risk pool that (A) gives every eligible person coverage (or comparable coverage) with no preexisting-condition exclusion, and (B) sets premiums and covered benefits consistent with the NAIC Model Health Plan for Uninsurable Individuals Act as it stood on August 21, 1996. (3) Other mechanisms: For (a)(1)(D)(iii), a qualifying mechanism either (A) provides for risk adjustment, risk spreading among insurers or policies, or other financial subsidy for eligible people (including help to participating insurers), or (B) lets every eligible person choose from all individual health coverage otherwise available.