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State Regulators Concerned Over Health Care Costs if PPACA Fractured

NAIC VP Adam Hamm. Photo from North Dakota's state government web portal
NAIC VP Adam Hamm. Photo from North Dakota's state government web portal

Leading state insurance regulators wondered aloud during a press conference of the National Association of Insurance Commissioners, held Tuesday in Washington, how states can muscle past a possible rejection by the Supreme Court of the individual mandate under health care reform, yet still have state health exchanges remain viable. What no one at the event could figure out was how to contain health insurance costs without more Congressional fixes if the exchange ever came to be.

Half of the states (26) at most, including the District of Columbia, will be ready for open enrollment in October 2013 for a begin date of the following year, according to the most recent NAIC tally. Exchanges will remain part of the law under all but one option—if the entire law is overturned, one insurance lawyer noted.

Health care lobbyists estimated that 12 or 13 states have moved beyond the legislative adoption or decree, and beyond the initial grant awards, to start the back office and information technology work needed to set up an exchange. But the lobbyists questioned whether the 26 counted is too generous a number to make it to the finish line by Jan. 1, 2014.

The Patient Protection and Affordable Care Act of 2010 calls for federal and state agencies to set up state-based health insurance exchanges, or Web-based insurance supermarkets, that will sell coverage to individuals and small businesses.

Under PPACA, states are to choose whether to run their own exchanges, participate in multi-state exchange consortiums or let the federal government provide exchange services for their residents.

Insurance commissioners said that it was too late for states that cannot meet the deadline to control exchanges at the state level. At best, they can have a state-federal partnership and must give notice after the presidential election in November. Otherwise, the federal government will take over their exchanges, and implement their platforms, in the states.

For example, Republican New Jersey Gov. Chris Christie, recently vetoed state Assembly Bill 2171, legislation that would create a health insurance exchange, or Web-based insurance marketplace, in his state. Christie said the state should wait until the U.S. Supreme Court rules on PPACA before creating an exchange.

But according to the commissioners who spoke Tuesday, it is too late to begin a state-based plan if states have not yet begun work on one; and if the law is upheld in part because of the complexity of setting them up and because of the heavy investment in time and infrastructure needed.

It is a “very elaborate computer system,” one commissioner noted. “If a state hasn’t already started development, it is too late to do a state-based exchange.”

If the federal government takes over the exchanges, which must be self-sustaining after a period of time, other questions remain. Among them: Where will the money will come from? Who will collect the funds? And by what method?

Adam Hamm, vice present of the National Association of Insurance Commissioners (NAIC), told reporters at the press conference that while NAIC Health Insurance (B) Committee Chairperson Sandy Praeger took a glass half-full approach to a mandate-less health reform law, there were a “number of us with grave concerns” related to enormous pressure to increase rates starting as soon as 2013.

Hamm, the Republican North Dakota insurance commissioner (who is up for re-election this year) compared a striking down of the mandate, to pulling a pin on a hand grenade and putting the grenade in the lap of the American people. Hamm also echoed the Administration’s argument that the mandate and requiring insurers to take all comers are interconnected. He noted also that a dangling guaranteed issue, unmoored from the individual mandate, would not work due to skyrocketing costs.

“If folks can jump in and jump out” of coverage, it puts enormous pressure on rate increases and it doesn’t matter how much the subsidies are—they aren’t going to be enough,” Hamm told reporters.

Actuaries will be crunching the numbers as soon as the High Court delivers its opinion—expected Thursday—and rate insurance requests will pour in, Hamm said. He added he is seeing rate increases in the individual market spike by 75% to 100% from one provider, and by 15% to 20% in the group market, both spikes on top of normal rate increases under current law. These numbers are going to be “much more if the individual mandate goes,” Hamm said.

Praeger, the Kansas insurance commissioner and former NAIC president (2008) spoke about possible legislative actions, such as specified enrollment times and medical underwriting if coverage is dropped and then re-entered, that could offset the effects of an anticipated spike in rates by controlling subsidies if the individual mandate is struck down, She suggested a “carrot and stick approach.”

Praeger, who has a history of working with the U.S. Department of Health and Human Services (HHS) on implementing parts of PPACA, and who is married to a doctor (which, she noted, gives her a perspective on wasteful utilization of health services, such as multiple X-Rays) said that health care costs are rising at an unsustainable level. She said also that PPACA is not so much about health insurance as it is a way to keep costs under control and get everybody the health care they need.

“Health insurance is the ticket in the door,” Praeger said.

Hamm, however, doesn’t see Congressional fixes as a solution because of partisan bickering in Congress.

Striking the mandate alone “puts enormous pressure on any Congressman to fight for their side,” Hamm said, adding that both Republicans and Democrats in Congress might start looking for solutions. But he added the search will likely end with one side saying, “keep your peanut butter out of my chocolate, and the other saying, ‘keep your chocolate out of my peanut butter.’”

Commissioners, including Exchange Subgroup chair Monica Lindeen, the Democratically elected Montana insurance commissioner, spoke Tuesday after the NAIC Exchanges Subgroup met in Washington and adopted five white papers bearing on aspects of exchanges set up for states to use as a guide. Many aspects of the HHS rules, such as elements as the Qualified Health Plans, are not yet complete. And state insurance regulators are still grappling with intent, interim rules and potential conflicts.

PPACA requires QHP issuers to “authorize the accrediting entity that accredits the QHP issue to release to the [state] Exchange and [to] HHS a copy of its most recent accreditation survey, together with any survey-related information that HHS may require, such as corrective action plans and summaries of findings.”

HHS (whose exchanges adviser Teresa Miller, former Oregon insurance administrator, met privately with her former state colleagues on Tuesday) also been late in issuing rules or doing so as guidance, instead, including some on the exchanges, and its summary of benefits and coverage.

On Tuesday, the NAIC Exchange Subgroup adopted white papers, drafted by five teams, respecting the exchanges' plan management functions. But half of the NAIC member states seem unwilling or reluctant to engage substantively in these functions while uncertainty swirls around PPACA’s status and the Presidential elections.

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