Decision day for states on health insurance marketplaces

by Michael Pearson, CNN

The gears on America’s slow-moving healthcare reform machinery will lurch forward just a bit on Friday, the deadline for states to decide whether they will run the insurance marketplaces required by the 2010 Affordable Care Act.

For most people, the decision won’t mean much initially. Whatever states decide, consumers and small businesses in every state will have access to a health insurance exchange — a place for people without work-based coverage to buy a policy.

Analysts also say plans and costs will likely be fairly similar regardless of who runs the marketplaces, which are supposed to begin accepting enrollments in October.

But the decision — driven by politics as well as concerns about cost and control — could make it harder to reach target markets and hamstring exchanges as a tool to wrest more effective, higher quality care from the chaotic healthcare system, said Sabrina Corlette of the Center for Health Insurance Reforms at Georgetown University.

"It’s a heck of a lot harder for the feds to do this because health care is local," she said. "It’s delivered locally. You have to get your health providers on board."

As of now, it appears the federal government will be involved in at least 30 exchanges, covering 56% of the U.S. population, according to a Kaiser Family Foundation analysis of state exchange planning.

The federal government will run 24 exchanges outright and likely partner with states to run the other six, according to the foundation.

Nineteen states will run their own exchanges. Two states — Florida and Utah — remained undecided as of Friday, according to the group.

Some states have enthusiastically embraced the state-based health exchanges.

For instance, Colorado, Connecticut, Massachusetts, Maryland, Oregon, and Washington have made such progress that the U.S. Health and Human Services Department has already approved their proposals.

But governors in some states say they’ve been frustrated by a lack of information from the federal government about what it wants to see in plans and how to pay for them.

Last month, the federal government extended its previous deadline to give states more time to comply.

On Wednesday, Republican Pennsylvania Gov. Tom Corbett ended his state’s effort to build an exchange, saying the issue was too important to be left to "haphazard planning."

"Pennsylvania taxpayers and businesses deserve more. They deserve informed decision making and a strong plan that responsibly uses taxpayer dollars," Corbett said. "It would be irresponsible to put Pennsylvanians on the hook for an unknown amount of money to operate a system under rules that have not been fully written."

It could be hard for states that have done little planning so far to be up and running by October, Corbett said. The federal agency implementing the health reform law says the federal government will be ready.

In general, many Republican governors have been loathe to embrace the exchanges, a cornerstone of President Barack Obama’s signature domestic achievement that was pushed through Congress by Democrats when they controlled the House and Senate.

Only five states with Republican governors — Idaho, Mississippi, Nevada, New Mexico and Utah — have opted to run their own exchanges.

Of the states letting the federal government run the show, only three are led by Democrats — Missouri, Montana and New Hampshire.

"The law restricts the abilities of governors and state legislatures to manage healthcare programs for the citizens of their states while simultaneously shifting billions of dollars in unfunded costs to the states," the Republican Governors Association said in March.

One big issue is cost: the law requires states to find their own funding for the exchanges by 2015.

This month, Maryland officials estimated a long-term cost of $33 million a year to run its exchange and suggested charging carriers an assessment to join the exchange, as well as a fee on group plans sold outside the exchange, to pay for it.

The federal government plans to charge a 3.5% fee on plans sold through exchanges it operates.

The irony, Corlette said, is that by declining to run the exchanges for themselves, Republican governors are effectively expanding the size and scope of a federal government they frequently rail against.

It also means states are forgoing an opportunity to use the exchanges to improve care, she said.

In Oregon, for instance, state officials want to use the buying power of the exchange to encourage health insurers and providers to reform how they do business, bringing down the overall cost of care and improving outcomes.

States also know best how to work with community groups to reach populations that are more likely to buy off the exchanges — the poor, the unemployed and people with limited English skills, Corlette said.

"The kind of public education campaign, the billboards and the ads and the words you use to describe this stuff, might be quite different from Alabama to Oregon or Minnesota to Texas," she said.

There are other advantages to states who decide to run their own exchanges, said Joel Ario, managing director of Mannatt Health Solutions and a former state insurance commissioner.

By running the exchanges themselves, states can coordinate regulation and enforcement of insurance plans across the commercial and exchange marketplaces.

That will likely ensure consumers are better served, particularly those who shift between private insurance and Medicaid.

But by giving the federal government control, regulation will become more complicated, making the healthcare system harder for navigate.

"That’s probably in the end not as good for the consumer," he said.