Healthcare reform: Obama administration eases requirements for states’ insurance exchanges –

By Noam N. Levey, Los Angeles Times

July 12, 2011

Reporting from Washington— The Obama administration moved Monday to ease some requirements on states to help them set up new insurance exchanges in 2014, a key feature of the healthcare law the president signed last year.

The state-based exchanges are intended to make buying health insurance comparable to shopping the Internet for an airline ticket or a hotel room.

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And by 2019, the exchanges are expected to provide insurance for an estimated 24 million Americans who don’t get their health insurance from their employer, according to the nonpartisan Congressional Budget Office.

Small employers with fewer than 100 workers also will be able to use the exchanges, which will have to offer plans with a minimum level of coverage. No plans will be able to deny coverage to people with pre-existing conditions.

The administration’s action Monday drew praise from consumer groups, including Small Business Majority, an advocacy group for small employers.

“The most important component of healthcare reform for small businesses is the creation of state health insurance exchanges. They will lower the high cost of insurance premiums and reduce the administrative costs that are so often the driving force behind skyrocketing rates for small group plans,” said Terry Gardiner, the group’s vice president of policy and strategy.

But creating the exchanges has proven a major challenge in many statehouses nationwide, some controlled by Republican lawmakers and governors openly hostile to the new healthcare law.

In a nod to this resistance, the Obama administration proposed regulations that will give states wide latitude in deciding how to regulate insurance companies that sell plans in their exchanges.

“Flexibility is the name of this game, and we are going to work very hard to meet the needs of each and every state,” said Dr. Don Berwick, head of the Centers for Medicare and Medicaid Services, which is overseeing the exchange regulations.

Under the new rules, some states may exercise relatively little control over the plans while others may place stringent requirements on insurers before allowing them to sell policies in the exchange, including controlling premiums.

The administration also proposed Monday to give states more time to set up their exchanges before the federal government would step in to do the job.

The new law requires the Department of Health and Human Services to operate an exchange in any state that does not create its own. Obama administration officials, as well as many insurers, would prefer that states run their own.

Thus far, 12 states, including California, Connecticut and Maryland, have enacted laws creating state-based insurance exchanges in 2014, according to a tally by the National Conference of State Legislatures.

Massachusetts and Utah already had exchanges before the federal law was passed.

And in Illinois, Gov. Pat Quinn, a Democrat, is deciding whether to sign a bill to develop an insurance exchange.

It is unclear whether the proposed regulations will speed development of exchanges in other states.

Louisiana Gov. Bobby Jindal, a Republican, has announced that his state will not run an exchange. And Oklahoma Gov. Mary Fallin, also a Republican, recently returned federal grant money to set up an exchange.

But insurance both industry leaders and consumer advocates said that the administration’s proposed regulations would give states the flexibility that many have been demanding.

“The regulation is a strong message to states that they are in charge,” said Karen Ignagni, who heads America’s Health Insurance Plans, the industry’s Washington-based lobbying arm.

The Obama administration is still developing other rules for the exchanges, including regulations outlining what benefits the insurance plans must cover. Administration officials said Monday that those additional regulations would probably be completed later this year.

Chicago Tribune staff writer Bruce Japsen contributed to this report.

Copyright © 2011, Los Angeles Times

via Healthcare reform: Obama administration eases requirements for states’ insurance exchanges –

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One Response to Healthcare reform: Obama administration eases requirements for states’ insurance exchanges –

  1. Thomas Loker says:

    Unfortunately, the exchanges, as proposed in the legislation, and as being enacted, will not likely live up to their promise, as the benefits they do bring are undermined by the still drastic lack of openness in the market. While the proposed goal was to provide a purchasing portal to allow consumers and business to compare policies and pricing, and become more subject to the effective price control in an open and competitive market, in one of the first obvious unintended consequences, the ideology of the authors trumped the pragmatism needed to reform this part of the system and the Affordable Care Act specifically is designed to prohibit the kind of open market we are expecting.

    Today, and preserved in the existing legislation, we have a system of regional or state-based insurance offerings. To some extent there is still significant regional variation in pricing as well. The fact that a person in Philadelphia generally cannot relocate to Nebraska and keep their health insurance plan is a big problem. A bigger problem is that the insurance available to the individual who chooses or is forced to move may not have the same standards of care tied to the policy they purchase. While some of this is corrected by the minimum policy coverage standards in the current legislation, each state can mandate additions to these requirements and many already do. So, the person moving from state to state will still have to change policies and each of these policies will have different terms.

    Due to the significant difference in coverage and mandates state to state, the providers do not typically belong to a national network model. Under the current economic model, for an insurer to offer or for a provider to accept, a national network price is considered a non-starter. There are two problems. First, most already do participate in a national network if they accept Medicare or Medicaid patients. Second, almost all other industries have a national model. These national models may or may not have a national consumer price. What they all typically do have is a suggested retail price. Local economic variances in cost and market velocity often do affect the price to consumers, and interestingly, they all seem to work themselves out, based on the free market influences. Small business owners in rural markets usually have lower economic costs. Synergistically, the market size and available capital often drive lower prices and lower margins. It is a consistent phenomenon that the relative retained earnings of like businesses in different markets often yield the same relative standard of living for the business owners. Look at most franchisees in a network and you will see that while the dollars flowing through the business vary significantly between major markets like an L.A. and New York for instance, and smaller markets like Huntsville and Winnemucca, the standard of living of the owners relative to that of the local economy does not vary as much. While the NYC owner may live in a multi-million dollar apartment off Central Park, and the Winnemucca owner may live in a $350,000 home in the only gated community near the town, they both may live in one of the top 10 percent of homes in the area. With changes in the fundamental economic system, healthcare costs will be proportionately in scale to the local economy.

    This problem of transportability and equality in healthcare coverage is actually much worse because there is even more variation in policy and coverage when a person is part of an employer-based health plan. Each company in effect becomes like a state. When someone changes jobs, he/she must often change his/her policy. These groups then carry a modified actuarial and make the system in fact much more complicated than it needs to be. From the employer perspective there is a big problem in negotiating coverage with insurers every year and coming up with the policy bundles to attract new employees. The cost of the employee premium is not the only cost of maintaining these complicated option plans. Further, there is a wide disparity in insurance options from company to company.

    Since Policy cost is driven by the actuarial and the larger the group, the larger the spread risk and the lower the actuarial cost, it makes no sense to have artificially small groups.

    1. Eliminate the impediments to a national insurance market.
    2. Let consumers purchase policies on an open national market.
    3. Mandate that these policies be transportable from state to state and job to job.
    4. Mandate minimum policy standards.
    5. Mandate National Solvency Standards for Insurers.
    6. Provide employees full choice in selecting the Insurer and Policy they desire by eliminating employer based group policy offerings – having smaller actuaries.
    7. Allow employers to offer tax exempt specific benefit payment amounts to the employee as part of competitive hiring practice with exemptions not to exceed $1,000 per month.
    8. Mandate that the actuarial that insurers use be across the full breath of an insurer’s policy group.
    9. Eliminate High-Risk Pools; all policy holders of a specific policy offering in the same pool.
    I am not against the exchanges; I think we need to fix the fundamentals as well. Also the exchanges need to enforce a mandate of full coordination of care and benefits across all available sources in a patient centric, as opposed to program centric system supporting virtual care teams.

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