Published by POLITICO
By J. LESTER FEDER AND JASON MILLMAN
It is now clear that when health insurance exchanges open in 2014 the federal government will be playing the lead, not the understudy.
Many insurance experts and health policy consultants predict only a dozen or so states will be ready to run exchanges on their own — and a few say that projection may be too sunny.
Only a handful of the most militant states are likely to continue all-out resistance to federal health care reform if the law is upheld — which ironically would mean the federal government would run their exchanges.
But for most states, the most likely scenario is “partnerships” in which states run some parts of these new insurance markets but the feds run many aspects that consumers will experience most directly.
Thirty-four states and D.C. received exchange planning grants totaling $856 million. Only 14 of them have passed legislation authorizing an exchange, and a couple more are moving ahead under executive orders from the governor. But even some of these states further along in the planning process have slowed down while awaiting the Supreme Court ruling or because HHS has been slow to spell out the detailed rules for setting exchange policy.
This partnership approach, which HHS first proposed last summer, is intended to be a transitional step for states that just can’t meet the deadlines to open their doors in 2014. But now it’s likely to be the default, not the fallback.
This scenario is causing concern at top levels of HHS that exchanges in most states will not meet a key goal of health care reform: functioning as a one-stop-shop where people can easily enroll in health insurance whether they pay for it themselves, qualify for subsidized private plans or are eligible for public programs such as Medicaid.
“We’ll do everything we can to make it work,” HHS’s Amanda Cowley, acting director of state health exchanges, said at a meeting of California’s exchange board last week in response to a question about federally run and partnership exchanges. “But it won’t be as good as a state-based exchange.”
Cowley echoed the worry of consumer advocates about whether federally administered exchanges will be able to “talk” to state Medicaid programs.
If they can’t, they worry, low-income people on the cusp of Medicaid eligibility could get caught in a tug of war. The exchange could say they’re too poor for the exchange subsidies. Medicaid could say they aren’t poor enough for Medicaid.
To address this concern, HHS initially planned to take over Medicaid enrollment in states where it’s running the exchange show. But states pushed back hard, and HHS allowed states to keep doing enrollment if they meet requirements like being able to process applications electronically.
“I think everybody’s really committed to making this work,” said the Center on Budget and Policy Priorities’s Judy Solomon, “but it’s going to be really hard.”
Lining up the eligibility systems may be hard in some states that haven’t yet completely transitioned to managing enrollment electronically. And states will have to update their rules so that they calculate an applicant’s income the same way that the exchanges will. And the changes will have to be made in a time when state Medicaid programs are already facing massive budget shortfalls that have led to staff cuts in several states.
If exchange watchers’ predictions come true, HHS could be spending a lot of time ironing out kinks.
“By my count there are 15 to 20 states that have a chance of achieving certification” by the January 2013 deadline to open their own exchanges in 2014, said HHS’s former top exchange official, Joel Ario. But, he qualified, “I think less than half of that number have a good chance.”
Cheryl Smith, who directs the exchange practice at former HHS Secretary Mike Leavitt’s consulting firm, is even more pessimistic, predicting only “between five and 10” states will meet this deadline.
There is some irony in the fact that the federal government will have such a large role. Before health reform passed, progressives in the House had wanted a national exchange, believing that it would be more aggressive in using its market power to protect consumers and drive down costs. More conservative Democrats in the Senate prevailed, however, and the final bill had the state-based system. The law gave HHS the power to step in if states didn’t act, but it didn’t give the department the full range of powers it would need to build an optimal system.
As it turns out, the feds are likely to be doing the lion’s share of the work when exchanges come online, thanks to the legal and political battles over health care reform and the policy hurdles facing state insurance regulators. But HHS isn’t using the opportunity to create the muscular exchanges liberals had wanted. The department has made very clear that it won’t aggressively impose rules on insurers beyond those already part of the law.
HHS maintains that it’s too early to project how big a role it will actually play. The department still hopes that state planning could pick up if the Supreme Court upholds the law. But the creation of the partnership option in last summer’s rules — along with the possibility of “conditional certification” for states making good progress — was an admission that the states are lagging.
These alternatives could work for states like Virginia, an aggressive health reform opponent whose governor has nonetheless laid much of the groundwork to move ahead if it loses in court.
“There’s far more going on below the surface than is apparent on the surface” in such states, said National Association of Insurance Commissioners consumer representative Tim Jost.
Even in states that have been holding their breath for the Supreme Court, insurance experts and health policy consultants are optimistic that they will still have time to claim some role in running their exchanges. But HHS is only giving states until Nov. 16 to submit a “blueprint” of the workings of a partnership exchange.
“I think that it would be challenging to do this if you haven’t engaged in any discussion or planning at this point,” said Families USA’s Claire McAndrew. But she added, “It’s doable” if states put a foot on the gas.
A guidance issued last week gave the greatest detail so far on how responsibilities would be divided up in a state-federal partnership. States will keep control of aspects most important to the health insurers and brokers it already regulates, while the feds would oversee aspects that consumers are likely to directly experience.
The states will determine that health plans qualify to sell in the exchange, set up rules for insurance brokers and agents, and provide limited customer assistance. HHS will take the lead in enrollment, process applications for subsidies, and staff the call centers that will field the bulk of enrollment questions (or complaints) from consumers.
But the separation between the exchange and Medicaid enrollment means consumer advocates still worry that low-income people could wind up in an insurance No Man’s Land without anyone having clear authority to get them covered.
Ario remains optimistic that consumers won’t see any difference between different kinds of exchanges. But, he said, everyone needs to get used to the idea that the notion of 50 state-based exchanges won’t be what’s seen in practice.
It’s a “continuum,” he said. “Every exchange is going to have some federal aspect. … [And] even the most strongly federal exchanges will need state cooperation from insurance department and the state Medicaid program.”