State Health Insurance Exchange

Under the Patient Protection and Affordable Care Act (PPACA), each and every state has been given the option to create a public, state-run health insurance exchange (“Exchange”), or to have an Exchange created for them by the federal government.  States across the country are taking various degrees of action (or inaction), but due to recent developments, BenefitMall would like to keep you updated on the latest news.

Exchange Background
The concept of an Exchange is one of PPACA’s central vehicles through which individuals and small employers would be able to obtain health care coverage at rates similar to those enjoyed by large groups that have the ability to negotiate favorable discounts.  By pooling the lives of individuals and small groups into large purchasing blocks, the hope is that the cost of future health care coverage could be better contained.   By the time PPACA is fully implemented in 2014, these Exchanges will serve as a central health care marketplace for millions of people.  The Exchanges also will provide assistance to those who qualify for enrollment in state Medicaid programs (incomes below 138% of the federal poverty level), as well as others who might need access to coverage.

For more information about Exchanges, visit other BenefitMall briefings:

• Health Care Exchange Overview and Update
• Why Public and Private Health Exchanges Must Co-Exist

State Updates
Many states are busy implementing the Exchange infrastructure in anticipation of the 2014 deadline, other states are still debating the next steps and many are still in a holding pattern. 

View BenefitMall’s last update detailing some of the key state activities prior to May.

This Legislative Alert provides updates on what happened during May for several key states. 

New York Loses Momentum
New York is typically one of the more progressive states when it comes to health care reform, having implemented a number of health IT programs and earning a $27 million “Early Innovator” grant from the Departments of Health and Human Services (HHS). The New York Insurance Department held a series of public forums in May to allow New Yorkers to express their ideas on the formation of a state-run public health exchange, but the state has thus far failed to enact legislation implementing a state-run public exchange¹.   Advocates of such a program are optimistic that an Exchange will be in effect by 2014, but momentum appears to have stalled².  If New York fails to meet several interim deadlines, it faces losing out on millions more in funding provided by HHS designed to encourage states to adopt and implement the new Exchange model.

California Faces Difficult Road Ahead
Since becoming the first state to form a public health Exchange after the PPACA enactment, California’s multi-billion dollar deficit isn’t making things easy. California’s Health Exchange Board, created through the law signed by former governor Arnold Schwarzenegger, is determined, however, to keep calm and carry on with the state’s efforts, and has hired third-party consultants and applied for grants to ease the tension. The gravity of the situation isn’t lost according to board member Susan Kennedy, who says “If California succeeds, it will lead the nation on health care reform. If it fails, we’ll precipitate the failure of health care reform across the nation³.”  

Louisiana Governor Announces Opposition to Creating State Insurance Exchange
On May 31, Louisiana Governor Bobby Jindal released a press release confirming earlier reports that the state would not take part in creating a state-run Exchange. “Obamacare is a terrible policy that needs to be repealed and replaced. It creates enormous new costs and future unfunded liabilities for states financing their Medicaid programs,” Jindal press secretary Kyle Plotkin said in the release⁴.  With this announcement, Louisiana joins the ranks of a number of states with Republican governors who vehemently oppose PPACA, most notably Georgia, New Mexico, Texas, Idaho and Florida⁵.  

Indiana, Wisconsin and Mississippi Governors Back the Trend
Despite general Republican distaste for PPACA, Republican regulators in many states across the country are facing quite a catch-22 when it comes to the creation of state–run health Exchanges. Having publically declared their opposition to PPACA, and by extension, the mandate to create a state Exchange, the only option left is for them to step aside and let the federal government establish the Exchange. Many governors are choosing, in their eyes, what seems to be the lesser of two evils by making efforts to move forward with the creation of health Exchanges in their respective states. Indiana governor Mitch Daniels signed an executive Order establishing an online portal for purchasing health Exchanges, along with Wisconsin Governor Scott Walker⁶.  Even Mississippi Governor Haley Walker is reviving previous Democratic efforts to establish a Mississippi Exchange through the state legislature⁷.  Despite potential legal challenges to PPACA, some of these Republicans are choosing to take the fate of the health care Exchanges into their own hands.

Colorado and Maryland Move Ahead
Colorado and Maryland are two states that have recently come one step closer to finalizing plans for their health insurance Exchanges. On May 26, Maryland Governor Martin O’Malley signed an executive Order creating a state Office of Health Care Reform. O’Malley also appointed nine members to a coordinating board who will oversee the “Maryland Health Benefits Exchange⁸.”   Meanwhile, on June 1, Colorado Governor attended a ceremony at a hospital where he signed a bill that would establish an Exchange in his state⁹.  Oddly enough, Colorado is one of a number of states that are BOTH applying for federal grant money via the PPACA and suing the federal government over the law’s constitutionality¹⁰.

Existing Exchanges:  Utah and Massachusetts
Two different Exchange models are in operation today that pre-date PPACA, which represents two different approaches. 

• The Utah Exchange is housed in a state agency, has a very small staff, runs on a small budget and is an “all comers” Exchange model.   It will accept any insurance carrier that is licensed in the state of Utah.  
• The Massachusetts Exchange, is in many respects, the direct opposite.  It is an independent not-for-profit, has a larger staff, operates on a larger budget and may be characterized as an Active Purchaser Exchange model that attempts to demand a higher value for its members than the “all comer” Exchange model. 

A recent study published this spring and funded through Kaiser Family Foundation offers some interesting insights on the Utah and Massachusetts experiences.  Sabrina Corlette, Research Professor, Georgetown University Health Policy Institute and one of the co-authors of the study write:

“In the end, perhaps the most important element for both exchanges is the commitment of their political leadership to their long-term success and sustainability. In particular, both states have demonstrated a willingness to be flexible and pragmatic in making the legal and administrative choices necessary to innovate, adjust to market changes and respond to customer feedback. As other states begin the hard work of creating their own exchanges, they'd be wise to see the Utah and Massachusetts models -- not as ideological 'bookends' but rather as entities that must continually evolve to meet the needs of real people¹¹. ”

Interesting, she notes that both the Utah and Massachusetts live up to some of the pre-conceived stereotypes, but in other cases do not.  Regarding the perceptions that the “Bay State” Exchange is based upon a big government approach, she challenges that perception when she writes:

“(T)he Massachusetts Connector has yet to turn away a plan that expressed a wish to participate. And it doesn't dictate prices. For its unsubsidized population, including small businesses, it does little to negotiate premium discounts. It simply doesn't have the leverage to do so. But it does use web-based decision tools to help consumers find the best value plan. Again and again we found evidence that the Connector was using free-market principles -- not heavy-handed regulation -- to generate better prices and quality for consumers¹². ”

Looking Ahead
As with many things in politics these days, the future of PPACA’s mandated Exchange platform still needs to evolve – which will likely continue after 2014.  In reality, the design concepts, infrastructure, administrative workflows and so on need to be implemented for each Exchange, and must be developed, tested and then revised based upon actual experience. 

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As more information becomes available, BenefitMall is committed to keeping you up-to-date in a timely manner. Visit www.BenefitMall.com to view past Legislative Alerts in the “Newsroom” section. Or, you may visit www.HealthcareExchange.com for blog posts, polls, surveys and numerous resources. If you have any questions, please contact your local BenefitMall Sales Team and they will be happy to assist you. Thank you for taking the time to read through this important notification.

The views expressed in this legislative alert do not necessarily reflect the official policy, position, or opinions of BenefitMall. This update is provided for informational purposes. Please consult with a licensed accountant or attorney regarding any legal and tax matters discussed herein.