This Robert Wood Johnson Foundation-Health Affairs policy brief examines the issues facing the federally-facilitated exchanges to implement the Patient Protection and Affordable Care Act (ACA).  As more states than expected decline to operate their own state health insurance exchange, these federally-facilitated exchanges become more important to the success of the ACA.

Whether an exchange is run by a state, by the federal government, or as a partnership between the two, the law mandates that exchanges fulfill five core functions: eligibility, enrollment, plan management, consumer assistance, and financial management.  Under a partnership model, states can perform plan management functions or consumer assistance, or both, while leaving other functions to the federal government.  Accordingly, the federal government will need to focus on how to operate the eligibility, enrollment, and financial management functions of the exchanges in the majority of states.

The U.S. Department of Health and Human Services (HHS) will face particular challenges in reconciling federal and individual state health insurance regulations, avoiding adverse selection resulting from different pricing for health insurance products inside and outside of the exchange, and coordination with individual state Medicaid programs.

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