Minnesota And Alaska May Be In A Catch-22 When It Comes To Establishing Health Exchanges

November 18, 2010 · Posted in The Capitol · Comment 

This morning, HHS released its “Initial Guidance to States on Exchanges,” in which it defines and summarizes the statutory requirements for establishing the new health insurance market places in 2014:

Beginning with an open enrollment period in 2013, Exchanges will help individuals and small employers shop for, select, and enroll in high-quality, affordable private health plans that fit their needs at competitive prices. Exchanges will assist eligible individuals to receive premium tax credits or coverage through other Federal or State health care programs. By providing one-stop shopping, Exchanges will make purchasing health insurance easier and more understandable.

States have a lot of discretion in how the construct their exchanges and the federal government has already issued its first batch of planning grants to help states build their unique market places. More funds will be available next year, once state legislatures across the country pass legislation establishing the exchanges. But the two states that did not apply for the funds in protest of health reform — Minnesota and Alaska — may have a hard time receiving new dollars, the guidance suggests:

Forty-eight States and the District of Columbia were awarded their first Exchange grants under Section 1311 in September 2010. Those grants were for planning purposes and the next round of grants will be for the purpose of establishing an Exchange. The opportunity to apply for grants will be announced in February 2011 and will become available on a rolling basis throughout the next three years. States will have to meet certain milestones in order to be awarded grants in 2011, and the size of State awards may be related to the number of milestones met. States that are not able to meet required milestones by spring 2011 may apply for grants later in the year. Necessary Exchange costs will be fully funded by HHS until 2015. After January 1, 2015, Exchanges must be self funded.

The problem is, Minnesota and Alaska would have to meet certain benchmarks without federal assistance in order to receive new funding. Should they fail to do this and find themselves unable to construct their own exchanges, “now or at a later point in the process,” “HHS will work with the State to establish an Exchange,” the guidance reads.

The federal government may not be exactly taking over, but ironically by resisting planning grants these Govs. Tim Pawlenty (R-MN) and Sean Parnell (R-AK) may be ceding at least some control to the federal government, bringing about the very kind of “government takeover” that they have been protesting by resisting these funds in the first place.

Wonk Room

Should The Federal Government Encourage States To Build Robust Exchanges?

November 9, 2010 · Posted in The Capitol · Comment 

The Washington Post’s N.C. Aizenman has a good article today expanding on the argument that after the midterm elections, the greatest gain for opponents of health care reform will be felt in the states, where Republicans won control of 20 statehouse chambers. Azenman explains why:

It is up to states to run markets, known as “exchanges,” through which individuals and small businesses will be able to buy health insurance plans, often with federal subsidies, beginning in 2014. States will also oversee a mostly federally funded expansion of Medicaid to cover a far larger share of the poor.

Many incoming Republican governors made their antipathy to the law a plank of their campaigns. Tennessee Gov.-elect Bill Haslam denounced it as “an intolerable expansion of federal power.” Wyoming Gov.-elect Matt Mead promised to join 21 states contesting its constitutionality in federal courts. And Maine, one of the first states to set up a task force to implement the law, will now be led by Paul LePage, a tea-party favorite who vowed to work against the legislation and predicted that voters would soon see headlines about him telling President Obama to “go to hell.”

Such state leaders cannot completely block implementation of the law: If they are unwilling or deemed unready to run an exchange by 2014, the legislation empowers the federal government to step in with its own version. But the law does grant states a fair amount of discretion.

The result, analysts say, is that two models are likely to appear: Democratic governors and legislatures are likely to emphasize vigorous regulation and government oversight, while Republican state leaders are likely to put greater stock in privatization and other free-market approaches.

You should read his entire piece to get a sense of how states can structure their exchanges, but the bottom line is this: “HHS has the final say” on what states can and cannot do. If they, for instance, allow every insurer to offer coverage or if only the most efficient issuers receive the benefit of participating in the new marketplace. But, Aizenman notes, “it could prove awkward for Secretary Kathleen Sebelius to turn down insurers backed by state governments.”

Awkward, yes, but also important. After all, the federal government can guide and incentivize states to establish certain kinds of exchanges. Consumer advocates would generally like to see states follow the Massachusetts and California models, in which the exchange is governed by an authority that can bargain with insurance companies on behalf of consumers and require issuers to meet certain minimum standards. For exchanges to succeed, states will probably have to implement some version of this design and if I were in government, I’d argue that this something worth the ‘awkwardness’ of turning down “insurers backed by state governments.” Unfortunately, the actual people in government don’t seem to agree with me.

Wonk Room

HHS Announces New ‘Early Innovators Grants’ To Help States Develop Technology For The Exchanges

October 29, 2010 · Posted in The Capitol · Comment 

The Department of Health and Human Services (HHS) announced a new round of grants this afternoon to help states expedite and simplify the process of developing IT systems for the new exchanges (the Travelocity-like market places that will help Americans find comprehensive insurance coverage). By the time the exchanges become operational in 2014, states should be able to use information technology to determine eligibly, enrollment, premium tax credits, cost-sharing assistance administration, and integrate the system with Medicaid and CHIP. Officials believe that sophisticated, yet “consumer friendly” IT systems are “critical to the success of the exchanges” and hope that the final product will look similar to the new HealthCare.gov website, where beneficiaries can compare different plans, identify if they’re eligible for government aid, and enroll in insurance.

But as Politico’s Jennifer Haberkorn points out this morning, “states view the project Early Innovators Grants” will be offered to five states or coalition of states “that demonstrate leadership in developing cutting-edge and cost-effective consumer-based technologies and models for insurance eligibility and enrollment for Exchanges” that “can be adopted and tailored by other States.”

“The benefits to the states are three-fold,” Ario said. “First, there are lower costs through the uses of shared models, second there is an improved implementation schedule, increased quality and reduced risk through the re-use, the peer-collaboration and the leveraging of lessons learned across the state boundaries. And finally, there is improved capacity for program evaluation because of the more uniform implementation theory,” he explained.

Last month, the federal government awarded exchange planning grants to 48 states and the District of Columbia and has announced that it will award “Establishment Grants” in February of 2011. “We’re looking for a lot of collaboration, we’re looking for states to lead….to really kind of provide the direction and progress that needs to be made early rather than later,” Henry Chao — the Chief Technology Officer at the Office of Consumer Information and Insurance Oversight — explained on the call, noting that states struggled to implement the IT requirements in Medicare Part D because they were given “very very short timeframes” “in terms of systems development.” “I think the lessons learned have really told us that we need to collaborate much more so upfront, not just with the states, but across the federal government, with other agencies.”

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Republicans Will Likely Preserve The Health Insurance Exchanges, Since It Was Their Idea

October 27, 2010 · Posted in The Capitol · Comment 

On Friday, Joel Ario, the Director of the Office of Insurance Exchanges at HHS reiterated his claim that regulators on the state level are far more open to implementing the exchanges in the Affordable Care Act than the current political rhetoric suggests. Speaking at a panel for the Alliance on Health Reform, Ario said “that there was a lot of interest on the state level in these exchanges and that it was very focused and very specific to the fact that state markets are broken.” “It’s hard to see who’s from a red state or a blue state, you just see people who are working in their marketplaces trying to put things together.” Watch it:

Washington and Lee University law professor Tim Jost, also a member of the panel, reiterated that the idea behind an exchange “comes out of free market advocacy groups and has been endorsed by them in the past. The particular way it is shaped, we’ll see blue states taking one approach and red states taking one approach, maybe,” he stressed, referring to the two existing exchange models in Massachusetts and Utah. Blue states may follow California’s lead and adopt the Massachusetts model, which allows the authority that governs the Exchange to bargain with insurance companies on behalf of consumers and requires issuers to meet certain minimum standards. Red states, conversely, may consider the Utah model where consumers can “compare a wide variety of health plans sold by any insurers that want to participate.”

Ario also added that he first heard of exchanges from a Republican legislator in Oregon, “who had a concept paper from Ed Haislmaie at the Heritage Foundation. I followed the idea for several years there, as it made its way through the Heritage foundation. They took credit for getting Governor Romney to support the idea in Massachusetts and to date, the three states that have exchanges have all been led by Republican governors.” (Click here to read Haislmaie’s article praising the exchanges and the individual mandate.)

Heritage may now be downplaying its support for the concept, but the exchanges are still fairly popular in conservative states. Last month, for instance, 48 states — 21 of which are suing the federal government over the constitutionality of the Affordable Care Act — accepted federal grants “to invest in research and planning to get the Exchanges up and running” by 2014.

Wonk Room

Will Employers Just Dump Their Workers Into The Exchanges?

October 22, 2010 · Posted in The Capitol · Comment 

Gov. Philip Bredsen (D-TN)

Gov. Philip Bredesen (D-TN)

I agree with Jon Gruber’s argument that the expectation that a large number of employers will dump coverage into the Exchanges is overstated. As Gruber writes, in response to this piece by Gov. Philip Bredesen (D-TN), this argument overlooks some fairly important real-world experiences:

The gist of Bredesen’s argument is pretty simple: Some firms will find it more attractive to stop offering insurance and let employees get coverage through the new insurance exchanges, where generous subsidies will be available. But the Affordable Care Act, which I’ve long supported, imposes strong penalties on firms that do not offer insurance, as well as sizeable tax credits for smaller firms that encourage them to offer. And in most firms, the majority of employees will make too much money to be eligible for large subsidies anyway. It is for this reason that the Congressional Budget Office estimated that PPACA will reduce employer sponsored insurance in the U.S. by only about 2.5 percent by 2019. In other words, the effect on employer sponsored coverage will likely be small.

CBO projections aren’t perfect, of course. But this particular projection is consistent with the best evidence we have-evidence that, once again, Bredesen completely ignores. In 2006, the state of Massachusetts put in place a system much like the one the Affordable Care Act will create nationally-with subsidies for low income groups (subsidies that are even more generous than those in the Affordable Care Act) and an individual mandate, but without the small group tax credit or meaningful penalties on firms that don’t offer insurance. The result? Employer-sponsored insurance has risen in the state by more than 100,000 persons.

Bredesen’s claim that employees would move from employer coverage to subsidized insurance in the exchange also ignores that the government is already subsidizing employer plans through the tax code and will continue to do so (at lower levels due to the excise tax) under the Affordable Care Act.

Economists and many Democrats generally agree that the ACA’s employer responsibility requirement could be strengthened and many supported a true pay or play provision that would have ensured less employer coverage erosion. But they were opposed by the very same conservative Democrats and Republicans who are now echoing Bredesen’s claims. Rather than shoring up employer sponsored insurance (ESI), these lawmakers instead listened to the hysterical arguments of groups like the National Federation of Independent Businesses (NFIB) and the Chamber of Commerce and strongly opposed the very provisions that would have avoided what they’re now predicting.

However, the general question of why employers choose to offer coverage is a good one and the best explanation I’ve heard argues that employers feel more comfortable with the existing system within which they themselves can define their contribution towards health care. In other words, rather than leaving it up to the government to set the amount they’ll have to contribute, companies want to be more in control of their own costs. Austin Frakt believes CEOs are wrong for thinking this, but agrees that employer coverage is here to stay.

Wonk Room

GOP May Seek To Undermine ACA By Weakening The Exchanges

October 15, 2010 · Posted in The Capitol · Comment 

Yesterday, Scott Gottlieb and Tom Miller of the conservative American Enterprise Institute a pilot program which had recently closed down due to limited participation and very high prices — Judi Hilman, director of the Utah Health Policy Project, tells me that the exchange operates “more like a flee market.” The plans have to meet a minimum acceptable deductible, but pay little regard to “affordability or benefit standards.” “What they’ve done is they’re only looking out for the employer’s concern, not thinking very carefully about what consumers or empoyees can accept from the coverage they obtain,” Hilman said. “The one advantage that might be there for some employees is to be able to have a choice of plans.” But the governor is holding “Utah as a model on Exchanges when they are far from that.”

Jon Kingsdale, the former director of the Massachusetts Connector Authority also points out that Exchanges that merely offer customers many different options are virtually useless. It “would be like telling your grocery store they have to offer every single kind of bread baked by every single bakery. … The Exchanges would be nothing more than an automated Yellow Pages,” he’s said. And Massachusetts residents agree. For instance, focus groups conducted by the Massachusetts Connector revealed that consumers felt that too much choice was “confusing” and “overwhelming.” “Participants expressed a desire for a manageable numbers of plans (e.g. three to four) offered by four to six carriers. In addition, consumers expressed difficulty making plan comparisons under the existing model.” “Instead, consumers preferred for information to be presented in a simple and standardized format that clearly distinguished between different benefit design options,” the Connector’s Fiscal Year 2009 report concluded.

The bottom line is that the Exchanges are one of the only ways states can protect consumers from plans that do not offer good value and cost-effectiveness and states should take that obligation seriously. As Kingsdale explained to me during our interview in October of 2009, “We estimate that we’ve done about 6 percent reduction in premiums and saved about $ 140 million a year on subsidized care for about 180,000 people. Because we’ve been able to a) be aggressive in selecting and setting rules for health plans and b) set up an Exchange that translates the various costliness of their networks into a price that the consumer understands,” Kingsdale said. “The consumer doesn’t understand the price of a visit or the price of a procedure, or the price of an x-ray and can’t shop on that basis, but can shop annually for a premium, or monthly. And the trick with the Exchange is to translate the generators of cost and value and quality into a package called a health plan from which consumers have a choice and they have both funding but they are the price differences. And so with that program, we’ve been able to do it and have substantial impact.”

Wonk Room

First In The Nation: Schwarzenegger Signs Bill Establishing Reform’s Health Exchanges

October 1, 2010 · Posted in The Capitol · Comment 

2103_AwesomeSchwarzenegger California became the first state to establish health care exchanges under the Affordable Care Act last night, after Governor Arnold Schwarzenegger signed a series of last-minute health bills into law, overcoming opposition from Anthem Blue Cross and the California Chamber of Commerce. President Obama called Schwarzenegger Wednesday night to “underscored how important this legislation is for California and the rest of the country“:

The legislation signed by the governor Thursday – Senate Bill 900 and Assembly Bill 1602 – will establish the California Health Benefit Exchange and an independent, five-member oversight board appointed by the governor and the Legislature that will be tasked with defining how the exchange will operate.

The exchange will serve as a government-run marketplace from which at least 3 million Californians, many now uninsured, would be able to buy health coverage. It could give individuals and small businesses the same buying power as corporations and other large employers.

The exchange also will funnel billions of dollars to California in subsidies, perhaps as much as $ 10 billion over 10 years.

Significantly, the California Health Benefits Exchange will be able to “bargain with insurance companies on behalf of consumers and create a relatively easy method for insurance customers to compare the benefits, costs and exclusions in policies offered by competing firms.” State lawmakers hope that by negotiating prices “for a large volume of individuals – getting group discounts the same way that large employers do” beneficiaries will see a “downward pressure on prices.” The California Exchange is partly modeled on the Massachusetts experiment, where regulators used the exchange’s clout to achieve a “6 percent reduction in premiums and saved about $ 140 million a year on subsidized care for about 180,000 people.”

The Exchange won’t be operational until 2014, but California HHS Director Kim Belshé notes that to regulators it feels like “2014 is tomorrow.” “Developing this kind of exchange is going to take some time, and we have got to get on with it,” she said. First, the state has to appoint the 5-person board (with appointees from the governor, Assembly and Senate), and then that board has to hire an executive director. That process alone could take months. “In order to flip the switch on the exchange, the state will need to test and make sure everything is up and running by the middle of 2013. And the federal government will require readiness by the start of 2014. That’s not that much time.” The state will benefit from the approximately $ 1 million dollars in planning grants the federal government announced yesterday and future enrollment grants.

Massachusetts, Utah, and Oregon are already operating exchanges and HHS expects other states to begin establishing their exchanges in 2011. If states fail to build an exchange, the federal government will enroll residents in a federal marketplace.

Wonk Room

21 Of 22 States Suing Over Health Reform Begin Planning For Exchanges With Federal Funds

September 30, 2010 · Posted in The Capitol · Comment 

The Department of Health and Human Services (HHS) announced today that it would distribute $ 49 million in planning grants to help 48 states — 21 of which are suing the federal government over the constitutionality of the Affordable Care Act — “to invest in research and planning to get the Exchanges up and running” by 2014. “In my month on the job, I’ve been out meeting with the sates and I’ve seen near universal support for the exchanges and a strong state interest for moving forward on a state-by-sate basis,” Joel Ario, director of the Office of Insurance Exchange, said on a conference call with reporters, which the Wonk Room attended. Indeed, just two states, Minnesota and Alaska, did not apply for the grants.

The planning grants will give states up to $ 1 million each to assess their existing IT system, plan for consumer call centers, hire staff and plan and coordinate “enrollment systems across Medicaid, the Children’s Health Insurance Program (CHIP), and the Exchanges,” but the government doesn’t expect most states to establish the Exchanges until 2011. Besides Massachusetts, Utah, and Oregon, all of which already have insurance exchanges (and California has a bill pending), “for most states it’s a 2011 proposition,” Jay Angoff the Director of the Office of Consumer Information and Insurance Oversight said on the call.

“So we’re we’re really looking at 2011 and we do think it’s a critical legislative year opportunity to establish exchanges themselves and the governing structures so you have a body that’s going down the details as you move down 2012 and 2013.” “But we would expect robust activity in the legislative sessions of 2011.” The 48 states that are receiving the grants did not commit to establish their own exchanges by 2014, but all of the states showed an interest in moving forward, Angoff said.

For those that do — and HHS certainly expects that a handful won’t, allowing the federal government to step in — the Commonwealth Fund released a new report today by Tim Jost outlining the various difficulties states will face as their governing boards begin building the exchanges. The report, which is well worth reading, recommends that among other things, that states issue identical regulations of the individual and small-group market outside and inside the exchange to prevent adverse selection, allow the exchanges to be government by independent agencies, and “offer employers the possibility of an aggregated bill covering the premiums of all employees.”

Wonk Room

The Importance Of California’s New Health Exchanges

September 28, 2010 · Posted in The Capitol · Comment 

Jonathan Cohn lays out the benefits of California’s new exchange legislation — currently sitting on the Governor’s desk — and suggests that insurers’ opposition to the measure probably means that the state is doing something right:

Under two bills that the California legislature passed and Schwarzenegger is apparently expected to sign, the state’s exchange authority would have explicit permission to “contract with carriers so as to provide health care coverage choices that offer the optimal combination of choice, value, quality, and service.” That mandate, combined with the bills’ other provisions, means the exchange authority would be able to negotiate pretty aggressively over price and quality, excluding plans that don’t serve consumers well. That’s more or less what corporate benefit departments and the managers of public employee programs, like the Federal Employee Health Benefits Program, do for their members.

The California model would follow the Massachusetts example, where the exchanges have the authority to include only the most efficient and quality-centric issuers into their connectors. Massachusetts has controlled costs for the expanded population (although costs have gone up in the entire system) and increased consumer satisfaction. Jon Kingsdale, the former director of the Massachusetts Connector Authority told Cohn that allowing any plan that hits minimum standards to sell in the exchanges “would be like telling your grocery store they have to offer every single kind of bread baked by every single bakery. … The exchanges would be nothing more than an automated Yellow Pages.”

And Massachusetts residents agree. For instance, focus groups conducted by the Massachusetts Connector revealed that consumers felt that too much choice was “confusing” and “overwhelming.” “Participants expressed a desire for a manageable numbers of plans (e.g. three to four) offered by four to six carriers. In addition, consumers expressed difficulty making plan comparisons under the existing model.” “Instead, consumers preferred for information to be presented in a simple and standardized format that clearly distinguished between different benefit design options,” the Connector’s Fiscal Year 2009 report concluded.

The for-profit insurers are weary that they may be excluded from the market and are asking the Governor to veto the bills. But the exchanges are one of the only ways states can protect consumers from plans that do not offer good value and cost-effectiveness. As Kingsdale explained to me during our interview in October, “We estimate that we’ve done about 6 percent reduction in premiums and saved about $ 140 million a year on subsidized care for about 180,000 people. Because we’ve been able to a) be aggressive in selecting and setting rules for health plans and b) set up an Exchange that translates the various costliness of their networks into a price that the consumer understands,” Kingsdale said. “The consumer doesn’t understand the price of a visit or the price of a procedure, or the price of an x-ray and can’t shop on that basis, but can shop annually for a premium, or monthly. And the trick with the Exchange is to translate the generators of cost and value and quality into a package called a health plan from which consumers have a choice and they have both funding but they are the price differences. And so with that program, we’ve been able to do it and have substantial impact.”

Wonk Room

Rep. Loretta Sanchez: States Should Exclude Insurers That Suspend Child-Only Plans From The Exchanges

September 22, 2010 · Posted in The Capitol · Comment 

Several large health insurers have announced that they would suspend child-only insurance plans “rather than comply with a new federal healthcare law that bars them from rejecting youngsters with preexisting medical conditions.” Most Democrats have remained mum about how to address the problem, but this afternoon Rep. Loretta Sanchez (D-CA) appeared on MSNBC’s Chris Matthews and suggested that states should prohibit such “bad faith” insurers from participating in the exchanges in 2014. Under the health care law, states can exclude certain insurers from the exchanges if they demonstrate a pattern or practice of excessive or unjustified premium increases.

Sanchez said that states — rather than the federal government — would be primarily responsible for holding insurers accountable and encouraged Gov. Arnold Schwarzenegger to sign a California bill that would prohibit insurers that stop offering child-only policies, from participating in the exchanges for a period of five years:

SANCHEZ: So obviously, one of those things is when we do set up exchanges in three years, we are going to get to choose. We are going to have a commission that is going to get to choose what policies are put in there. Certainly, I would call a company that is not writing children’s insurance a bad faith company and I would suggest they wouldn’t be found in that new 30 to 40 million-person market that we will create.

Watch it:

Some insurers may have decided to leave the child-only market because the new take-all-kids regulation made that product less profitable, but it’s also possible that other companies suspended their plans in order to avoid possible premium increases (that could have made them ineligible for the exchanges.) Still, the very notion that members of Congress are calling on states to use their regulatory authority to clamp down on “bad faith” insures, is quite encouraging.

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