Filed Under:Health Insurance, Individual Health

Pennsylvania forgoes state exchange

Governor tells Secretary Sebelius it cannot proceed at this time; thus, will get federal exchange

Gov. Tom Corbett in Harrisburg, Pa. (AP Photo/Daniel Shaknen)
Gov. Tom Corbett in Harrisburg, Pa. (AP Photo/Daniel Shaknen)

Pennsylvania took itself out of health insurance exchange limbo today by telling Health and Human Services (HHS) Secretary Kathleen Sebelius that it will not move forward with establishing a state-based health exchange at this time because of too many uncertainties to allow for planning an exchange.

The letter was written by Gov. Tom Corbett and dated Dec. 12, and now allows HHS to set up a federally facilitated exchange in Pennsylvania.

After repeated prods for information from HHS and public statements that not enough information was forthcoming, Corbett said in his letter that “Pennsylvanians have waited long enough for answers, and continuing this environment of uncertainty harms Pennsylvania business and consumers who are attempting to prepare for changes created by the Affordable Care Act (ACA).”

Corbett said that although many questions had been asked of HHS over the past two years, he has received scant information.

He said he remains concerned that state authority to run a health insurance exchange is “illusory” because it would end up shouldering all of the costs by 2015 but have no authority to govern the program.

“Until this week, less than five days before the deadline for a state-based exchange decision and blueprint, we received little acknowledgement of those questions. Even HHS Secretary Sebelius recently admitted on a call with governors that the regulations released a few weeks ago were not final and that more drafts are to be expected,” Corbett stated. 

The Republican governor said he was also concerned about the costs of Medicaid expansion in his state, noting that it could reach $4 billion in state-only costs over the next eight years, precipitating substantial tax increases. He wants more answers on flexibility, costs and impacts of any exchange, he told Sebelius. 

Pennsylvania is one of 28 states that declared it will allow the federal government to operate its exchange. 

The decision to establish a state-based exchange can be re-evaluated by states each year, and Corbett left that possibility open in his letter.

Pennsylvania Insurance Commissioner Mike Consedine testified exactly three months ago before Congress' Health Subcommittee of the Ways and Means Committee on the general lack of direction and guidance Pennsylvania had received from HHS.

Consedine, a member of the Federal Advisory Committee on Insurance (FACI), also formed and chairs an NAIC panel on regulatory alternatives to state-based exchanges. Its members are largely those states, like Wisconsin and Kansas, who anticipate a federal exchange as they have decided not to move forward with the state exchange model for now. 

The group, the Health Care Reform Regulatory Alternatives Working Group, vice-chaired by Wisconsin Insurance Commissioner Ted Nickel, addresses the concerns of the many states that are expected to have the federal government work in concert or in full with them to create the PPACA-mandated health care exchanges.

Consedine had earlier noted that there is a need for the group, as more than half of the states have chosen a different route in dealing with PPACA, which includes, for states, implementing state health care exchanges and addressing Medicare expansion funding.

One of the charges is to “identify opportunities for members to continue to innovate and regulate outside of a federal exchange.”

HHS’ Centers for Medicare & Medicaid Services, in a Dec. 10, 2012 FAQ document on exchanges and Medicaid, said that HHS intends to work with states to preserve the traditional responsibilities of state insurance departments when establishing a federally facilitated exchange for a particular state.

Additionally, HHS will seek to harmonize exchange policy with existing state programs and laws wherever possible, the document stated. 

“For example, qualified health plans (QHPs) that will be offered in a federally facilitated exchange must be offered by issuers that meet state licensure and solvency requirements and are in good standing in the state and QHPs will be subject to requirements that apply to all individual and small group market products such as the proposed market rules.”

Accordingly, CMS assured states, they will continue to maintain an important responsibility with respect to qualified health plans licensed and offered in their states, regardless of whether the exchange is federally facilitated or state-based.

However, CMS is currently working to determine the extent to which activities conducted by state insurance departments such as the review of rates and policy forms could be recognized as part of the certification of qualified health plans by a federally facilitated exchange. HHS will rely on state review processes in connection with QHP certification decisions and oversight by a federal exchange, CMS stated. 

It is expected that HHS will work with regulators in each state with a federal exchange to identity these efficiencies.

HHS said it would “seek to capitalize” on existing state policies, capabilities and infrastructure that can also assist in implementing some of the components of a federally facilitated exchange.   

HHS also will collect state-specific Medicaid and CHIP policy data so that the federally facilitated exchange is able to evaluate Medicaid and CHIP eligibility.

HHS also said that its personnel will be abreast of relevant state insurance laws and Medicaid and CHIP eligibility standards so that they can advise consumers. 

A federally facilitated exchange’s role and authority are limited to the certification and management of participating qualified health plans, CMS assured states. Its role and authority do not extend beyond the exchange or affect otherwise applicable state law governing which health insurance products may be sold in the individual and small group markets.  

To fund the operation of the federally facilitated exchange, participating issuers will likely pay a monthly user fee to support the operation of at least a 3.5 percent of premium, according to the FAQ.

States may be reimbursed for some costs, but it was unclear how and when and under what exact circumstances. 

After certain prescribed funds are no longer available, HHS anticipates continued funding, under a different funding vehicle, for state activities performed on behalf of the federally facilitated exchange.  

CMS did not spell out what this other funding vehicle would be.

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