State of the States: Health Insurance Exchanges

June 8, 2012

Again, it was another slow week in the states as governors and policymakers made preparations for the Supreme Court’s ruling. Let’s dive in.

Last week, the New Hampshire legislature sent HB1297 to Governor John Lynch (D); a bill that prohibits New Hampshire and all state agencies, departments, and subdivisions from participating in planning for or creating a state-based health insurance exchange. Under a previous version of HB1297, the state was banned from cooperating with the federal government in any way in preparing for an exchange, but under the version sent to the Governor, the state can now plan for a federally-facilitated exchange. It is not known if Governor Lynch intends to sign the bill, but in the past, he has been hesitant to oppose the legislature on exchange related legislation. Stay tuned.

Meanwhile, in Alabama, Republican Governor Robert Bentley announced that he will use an Executive Order to create an exchange if the ACA is upheld by the Supreme Court. Exchange legislation passed Alabama’s House, but never came up for a vote on the floor of the Senate after Gov. Bentley threatened to veto any legislation sent to him before the Supreme Court ruled. Even with the legal authority for an exchange undefined at the point, Alabama has been making strong progress with its exchange planning and has an active solicitation to procure an exchange IT backbone.

In Illinois, dozens of organizations sent a letter to Governor Pat Quinn (D) this week urging him to create an exchange using an Executive Order. Until a few weeks ago, state lawmakers were negotiating legislation to create an exchange but chose to halt talks until the Supreme Court rules on the ACA. Governor Quinn has been silent as to whether he will issue an Executive Order, but in the meantime, the Illinois Department of Insurance continues exchange planning.

In mid-May, Vermont and the Center for Medicare & Medicaid Services held an exchange “Planning Review” session to touch base on Vermont’s exchange planning progress. Exchange-watchers will be interested in signals of possible multi-state cooperation around exchange operations emerging from this review since Vermont reports initial conversations with Rhode Island, and an interest in holding conversations with other states to discuss ways to share back-office exchange functions. Possible areas of collaboration include data center operations, call center operations and premium management. Vermont also revealed that it is likely to defer to the federal government for managing the state’s risk adjustment.

Also, today in California, the Enroll UX 2014 team is releasing their exchange application web portal design to states and interested IT professionals. The Enroll UX 2014 project is a partnership between private foundations, the federal government and certain states to create a user-friendly, intuitive web portal to help consumers compare and select health plans on an exchange. The portal will not calculate subsidies or determine Medicaid eligibility, but UX 2014 supporters stress that their system is highly interoperable and can be easily integrated with those IT programs. Initially eleven states signed up to collaborate with the project in 2011, but that number has now grown to seventeen and includes some states that have opposed the ACA in court.

With the Supreme Court expected to rule on the ACA by the end of the month, exchange watchers are eagerly trying to predict the Court’s potential ruling and corresponding scenarios. The U.S. Department of Health and Human Services says they will be ready for a full range of outcomes, but continues to stress that their focus is on preparing to implement the law. Secretary Kathleen Sebelius said on Thursday that her agency will be “ready for court contingencies" but stated, “it’s the best preparation to anticipate that the law is fully constitutional.” In her comments, Sebelius said that if the ACA were struck down entirely it would have wide-ranging consequences and require Congress to set new Medicare rates, undo the market for pre-existing condition coverage and stop all grant money to set up health insurance exchanges.

States entering into long-term contracts to develop the IT infrastructure for exchanges while the future of the ACA is still unclear, are doing their best to ensure they are not stuck with the bill should federal grant money fail to appear. In California, Peter V. Lee, the executive director of California’s exchange, said that should the Supreme Court strike down the entire ACA, the state’s $359 million contract with Accenture would be void. From his point of view, “There is zero potential that the general fund in California will be on the hook.”

Finally, in the policy world, an article in Health Affairs by John Graves argued that the complexity of current formulas for determining insurance subsidies and program eligibility could discourage eligible applicants from signing up for insurance subsidies, particularly those worried that they could wind up having to pay back the government at tax time for a mistake or a change in income. To ensure maximum participation, Graves recommends striking a balance between providing generous health insurance premium subsidies and using an income standard that compensates for users with fluctuating incomes. 

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