With the the Patient Protection and Affordable Care Act (PPACA) upheld by the U.S. Supreme Court, half of the states in the nation now face a federally run health care exchange, the default for states that haven’t made progress or declined involvement in setting up a state run marketplace for health insurance coverage.
See also: State-Based Exchange Status Map
Absent massive extensions which some say could still be granted by the Administration, the landscape for health insurance could be a federally-run system for administration, enforcement and assessment of insurers for at least half the nation.
National Association of Insurance Commissioner (NAIC) officials have said it is too late to start a state-based exchange if work has not already been underway for a while, and still meet the deadlines imposed by the U.S. Department of Health and Human Services (HHS), with open enrollment beginning in October 2013.
Half of the U.S. states (26) at most, including the District of Columbia, will be ready for open enrollment in October 2013 for a start date of the following year, according to the most recent NAIC tally given at a press conference earlier this week here in Washington.
State and federal health care industry 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 lobbyists have questioned whether the 26 counted is too generous a number to make it to the finish line by Jan. 1, 2014.
A closer deadline approaching is the Nov. 16, 2012 date for states to file an exchange plan if they are going to form a state or a federal-state partnership.
Several states that had put their foot down and said they weren’t moving forward are now exploring setting up an exchange; other governors have sent their grant money back, while others are now wondering what a federal “partnership” would look like and who would pay for certain aspects of it. Other questions include the role of producers, the applications of solvency, how to handle complaints and market conduct issues brought before the state departments and how to feed that information to the exchanges, and how to add completion to the exchanges, the bottom tier of which must satisfy the mandates of the essential health benefits guidelines.
The law’s anticipated implementation in states that have foregone a state-based exchange or state-federal partnership would appear to fly in the face of those states’ wishes to retain all control over insurance markets.
The Patient Protection and Affordable Care Act (PPACA) of 2010 calls for federal and state agencies to set up state-based health insurance exchanges, or Web-based insurance supermarkets, that individuals can use to sign up for public health insurance programs or use new subsidies to buy commercial coverage.
States are to choose whether to set up their own exchanges or let HHS provide exchange services for their residents.
Congressional Republicans, including those on the House Energy & Commerce Committee have decried the decision and its possible “costly mandates and taxes” but want “to preserve state flexibility and avert the spending explosion,” in the words of Committee Chairman Fred Upton, R-Mich., after the decision today.
“The states continue to have a strong incentive to set up the exchanges. Otherwise, they lose a level of regulatory authority. Whether that is sufficient remains to be seen,” stated Robert Weiner, a partner at Arnold & Porter here in Washington and a former associate deputy Attorney General at the U.S. Department of Justice, where he oversaw the defense of the new healthcare law from the outset of litigation through the arguments at the Supreme Court.
Without specific action by a state, HHS will enforce the insurance reforms.
HHS will only allow a state to enforce the reforms if HHS determines that it is substantially enforcing the reforms, as one Washington insurance lawyer noted.
“However, since states cannot enforce federal law, the states will need to enact the reforms at the state level in order to meet the requirement of substantially enforcing the reforms,” noted Chris Petersen, insurance regulatory lawyer and partner at Morris, Manning & Martin, L.L.P., in Washington.
“I think there is going to be a lot more interest now in what the states are doing,” said Sandy Praeger, Kansas insurance commissioner and head of the NAIC’s Health Insurance (B) Committee.
In Kansas, Gov. Sam Brownback has sent back $31 million of early innovator planning grant funds for the Exchange, and has said he wants to wait until after the election to make a decision on a state exchange. There was no legislative support for a state-based exchange, anyway, Praeger noted.
Praeger continues to press on, despite some awkward questions from the press that placed her in a different position than that of her governor.
“We still have a chance of exploring the state-federal partnership … We want to continue to explore that option,” Praeger said. Praeger, as an elected commissioner, said she could pursue a state-based exchange through a declaration letter, although it was not her intention to do so and would not move forward without the government’s support. She stressed flexibility, but acknowledged a difference of opinion. Praeger repeatedly said it was her hope to do some elements of the exchange, such as consumer assistance and plan management certification, because she thinks it would be in the best interest of her citizens, and the broker community to do so, to oversee those plans. But, she added, “Time may run out on us.” Praeger said there was no wiggle room in the deadlines for exchange readiness. They are written into the law, and HHS knows that.
Praeger said it was important that the state retain some regulatory authority.
Of concern, on the Medicaid portion of the ruling, she worried about the potential for many folks to fall through the cracks and said “we have to address that in some way.”
On the other hand, a few states, like New York are standing by, ready to enforce.
“My office stands ready to enforce the Affordable Care Act to ensure that all New Yorkers will benefit from the law's protections,” stated New York Attorney General Eric T. Schneiderman in response to the Supreme Court’s decision today.
The information technology (IT) infrastructure required is a massive component of the exchange, basically the groundwork that needs to be laid before anything substantive can begin, and it is a time-consuming and expensive process. For California, a state intent upon having an exchange even if the law had been stricken, companies have already gone through a competitive bidding process to secure rights to implement the exchange. California announced today it chose Accenture to implement the statewide health insurance exchange, the California Healthcare Enrollment, Eligibility and Retention System (CalHEERS) under a $359 million, contract.
Accenture will lead the development of the system that will enable Californians to determine their eligibility for subsidized health benefits, compare insurance plan options and enroll in coverage. The target date for completion is October 2013, to allow individuals to begin pre-enrollment in health plans in advance of the January 2014 deadline for all states to implement a health insurance exchange.
Both state and federal regulators are working on their own data systems for healthcare information.
Another element is financing and the assessments under a federal exchange system, which will be the job of the federal government for licensed insurers in the exchange.
States are going to need to decide if they want to expand Medicaid since today's opinion gives the state the option to do so. “I think many states will have to take a hard look at their budgets before they agree to this new expansion,” Petersen, Morris Manning, said. To be sure, many state commissioners and some attorney generals’ offices have moaned about their budgets in various forums.
States like Florida expressed dissatisfaction with the decision, but said they would move ahead.
“With the affirmation of the Affordable Care Act, I remain concerned about the potential for increased health insurance premiums and continued disruption to the stability of the marketplace for many Floridians,” stated Florida Insurance Commissioner and NAIC President Kevin McCarty, speaking in his state office capacity. “Nevertheless, we will work with the Florida Legislature and Gov. [Rick] Scott (Rep.) to implement the Supreme Court’s decision and develop an implementation strategy that minimizes market disruption and allows Florida’s health insurers and HMOs to continue to provide coverage in our state,” McCarty stated.
States such as Kansas, Maryland, New York, Oklahoma, Oregon, Wisconsin and a multi-state consortium led by the University of Massachusetts Medical School were selected to receive a total of approximately $241 million in early innovator grants for IT infrastructure to operate the exchanges. States that received this “Early Innovator” funding are also eligible for Level One and Level Two Establishment funding. Level Two funding requests are due this week, or on June 29.
"How are states going to be charged under a federal partnership?" asked Pennsylvania Insurance Commissioner Mike Consedine, back in March.
Consedine, in an interview with Lifehealthpro.com today after the decision, said that probably all states, including Pennsylvania, are looking at flexibility with the HHS guidelines.
He noted that even though Pennsylvania was one of the states that challenged the constitutionality of the law, the state had also pragmatically applied for and gotten an HHS Level One grant for $33 million to explore a state-based exchange, and was in the preliminary planning stages, and engaging KPMG as it works behind the scenes.
KPMG was hired by the Pennsylvania Insurance Department as part of the Commonwealth’s ongoing analysis of options to be considered in determining the Commonwealth’s plans to comply with the health insurance exchange requirements of PPACA.
Of significant concern to states is the self-funding — at the end of the day, will taxpayers directly or indirectly have to pay for the exchange? That is what the state will be exploring with the grant money to determine what decision it would make in terms of pursuing a state-based exchange, Consedine said.
KPMG spelled out different risks under both the state and federal scenarios, and Pennsylvania is mulling its options, as are other states, but said it welcomed the clarity finally brought about by the High Court's decision today.
Even states that are trying vigorously, and which have led state exchange action on the legislative action front with enabling laws passed before 2012, like Illinois, are having trouble meeting deadlines.
Some states have taken early grant money and done nothing else but explore options, Some have refused it or have returned it, or allegedly used it to form a foregone conclusion. Back in December, Senate Health, Education, Labor and Pensions (HELP) Committee Chairman Tom Harkin (D-IA) called for a federal investigation into whether South Carolina Governor Nikki Haley exploited taxpayer dollars for political purposes.
Emails published by the state Post and Courier reportedly demonstrate that Committee member and state Department of Health and Human Services Director Tony Keck was under clear instructions from Haley regarding the outcome of the process, according to Harkin.
"The idea that the federal government will run 25 exchanges keeps them up at night," Don Garlitz, executive director of the exchange solutions arm of bswift Inc., Chicago said at a recent industry conference covered by Allison Bell. "They don't want that."
One possibility is that HHS will start granting waivers to extend times, given that it has missed deadlines for rules or instead issued interim guidelines on many elements of the law, as with essential health benefits. American Action Forum recently put out a report that said its research found that PPACA regulations have missed nearly half of their statutory deadlines. Of the PPACA regulations with legal deadlines, 47 percent, 20 of 42, have broken the mandated implementation schedule.
“Perhaps the most expensive ‘tardy’ regulation involved forcing health plans and third party administrators to publish a ‘uniform’ summary of benefits for health plans. The Administration was supposed to issue a final rule by March 23, 2011, but a rule was not published until almost a year later,” the Forum said, estimating a cost of $146 million for it.
HHS officials were not available for comment immediately on extension or waiver possibilities.
Of course, whether the exchanges function and are sustainable after a year is another story.
As Willis Group, the global insurance broker, noted through an executive, “employers and their advisors will now continue to move forward with their plans … The issues regarding employer plans versus individual marketplace for insurance for their employees will still be issues employers will grapple with. The penalty (or tax as the Supreme Court has now labeled it) is still relatively small and with the hint that taxpayers might just refuse to pay the tax, it remains to be seen whether that tax will be enough of an incentive to get taxpayers to purchase insurance (or otherwise seek coverage) in enough numbers to make the insurance reforms work within the context of the private insurance market.”
Jay M. Kirschbaum, practice leader at the Willis Human Capital Practice, concluded that "if that market does not offer a cost effective alternative to an employer plan (and given the cost impact of the insurance reforms that is not only possible, but likely) the employer provided market will still likely offer the best option for most employees.”
For exclusive, ongoing coverage of the PPACA verdict and its impact on the industry, visit www.lifehealthpro.com/PPACA.