Experts share challenges of setting up state insurance exchanges

About Joanne Kenen

Contributing editor to Politico Magazine and former health care editor-at-large, Politico, Commonwealth Fund journalist in residence and assistant lecturer at Johns Hopkins Bloomberg School of Public Health.

Setting up a state insurance exchange is a complicated endeavor – made more so by the bitter politics of health reform and the uncertainty over the Supreme Court ruling. Some states, like Maryland, are proceeding with enthusiasm. Others are fighting the health law in court – but quietly doing some of the ground work for an exchange anyway. Other states say they just aren’t going to set one up, no way, no how – meaning the federal government is supposed to be ready to step in with a backup exchange plan.

At the panel on state exchanges at Health Journalism 2012, we heard from two experts – Maryland Health Secretary Josh Sharfstein, who is coordinating his state’s exchange efforts as the head of its exchange board, and Heather Howard, the director of the State Health Reform Assistance Network, based in Princeton. (For her snapshot maps of where states stand in exchange development as of April 2012, click here.)

One point Sharfstein made: Even in a state as committed to reform as Maryland, setting up the exchange is no simple task. Much of the challenge arises from updating and revamping – and adding – to the state’s information technology capacities. When exchange builders talk about IT, they aren’t referring to the electronic health records you’ve been hearing about. This is a system to help people shop in the exchanges, (for individual or small group coverage), figure out whether they belong in Medicaid, CHIP or the exchange and, if in the exchange, whether they qualify for federal subsidies – and how much. It’s not just the very poor who qualify, there are subsidies available on a sliding scale up to 400 percent of poverty, currently around $90,000 for a family of four. These complex IT systems will also have to deal with what happens if people’s income changes – whether the subsidies rise, or whether they have to give some of it back. If it doesn’t sound easy – it’s not.

“On the topographical map of anxiety, this is a skyscraper,” Sharfstein said of the IT challenge.

One question that came up is why it matters whether the state or the federal government runs the exchange. Both speakers had a long list of reasons – including making decisions (based on the specific dynamics and demographics of a given state’s insurance market)about whether to merge or keep separate the individual and small group markets, the role of brokers and navigators, conditions for a health plan for participating in the exchange (including some requirements affecting their business outside the exchange – where people can still buy policies but not get subsidies) how to finance the exchange, the type of governing board the exchange should have, and who should (or should not) serve on it. (Another big issue facing states is how to define the essential benefits package – but I’ll post separately on that soon.) In fact, the federal government has left so many decisions up to the states that it threatens to overwhelm some of the states, or create paralysis, Howard said.

Toward the end of the session, I asked how many people in the audience thought their state would be ready to run the exchange on Jan. 1, 2014. Not a whole lot of hands went up. And, logically, when I asked how many thought their state would not be ready, a whole lot of hands shot up. So I asked Howard to explain the “hybrid” that HHS has offered to create. Basically, this means that the federal government and the state will divvy up the exchange responsibilities, with the state doing what it can and the feds backstopping the rest. This is supposed to be a sort of a temporary bridge, with the state eventually assuming full responsibility. With states – and the court – in flux, no one really knows exactly how many states will end up going for this hybrid option, but some experts estimate it could be about half. It’s just too soon to know for sure.

Joanne KenenJoanne Kenen (@JoanneKenen) is AHCJ’s health reform topic leader. If you have questions or suggestions for future resources, please send them to

Two other big state issues that I’ll post on separately soon: How the states are deciding on the essential benefits package, and what options do states have if the Supreme Court kills the mandate, but leaves most of the health law intact. Shoot me an e-mail if you see good local coverage on this so we can link to it.

Final note: here’s the best one-stop shop for information on state exchange building and some state-specific funding information is here. The National Council of State Legislatures also is a good resource.

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