Experts make predictions for future of health 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.

By Nov. 16, states must make firm decisions about whether they will run a state exchange, whether they will allow the federal government to set up the exchange in the state, or whether the state and HHS will partner on the exchange – divvying up responsibilities for a year or two as the state gradually assumes more responsibility. The election obviously puts the long-term future of health reform in doubt but, as of the Nov. 16 deadline day, the Affordable Care Act will still be in force.

Joanne Kenen

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

We had an AHCJ webcast last week with three experts on state exchanges to explain some of the choices and factors in the decision making. Interestingly, all of them think state-based exchanges will remain part of the health reform lay of the land, no matter who wins in November, though the context may change. If Barack Obama is re-elected, the law survives and all states must have an ACA-compliant exchange ready on Jan. 1, 2014. If Mitt Romney is elected, he’s promised to repeal it – and leave a lot of the problem solving to the states. Exchanges could be part of the state approach, in some shape or form, particularly as many states have already done a fair amount of the groundwork.

The three experts have a great deal of state-focused health policy experience. All three have on-the-ground experience in state government, all have worked in Washington, D.C., and they bring a mix of foundation/think tank/academic/private sector consulting background.

Joel Ario is consulting with states on exchanges as a consultant at Manatt Health Solutions after working on health law implementation at the Department of Health and Human Services, where he was head of the Office of Health Insurance Exchanges.

Cheryl Smith is a director at Leavitt Partners, working on the health insurance exchange practice. She worked in state government in Utah (which has its own small business health exchange, although you don’t hear as much about it as the Massachusetts exchange). Leavitt Partners was formed by Mike Leavitt, former Utah governor, former HHS secretary for President George W. Bush and now helping Mitt Romney’s transition planning).

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Heather Howard has worked as a congressional and White House health policy aide, served as commissioner of health for New Jersey and is now running a Robert Wood Johnson Foundation-backed program at Princeton’s Woodrow Wilson School to help states with the nuts and bolts of setting up exchanges. (Here’s a very useful related web site on state implementation, which is also on the AHCJ health reform resource list).

The webcast is online so AHCJ members can listen to it at their convenience. It includes a pretty detailed description by Smith about Utah’s exchange – it’s only for small businesses, not individuals, it’s fairly lightly regulated, and it doesn’t include mandates nor subsidies. In other words, it’s not compliant in its present form with the Affordable Care Act. But it has had some success in reaching younger, healthier workers – who are needed to balance out older, sicker people in an insurance risk pool. It has a lot of features that conservative states like and they may borrow from Utah in various ways no matter what happens on Nov. 6.

Here are some other points that emerged on the webcast that struck me. Thanks to AHCJ’s Pia Christensen for pitching in on note taking while I was busy moderating, and to Jason Millman of Politico Pro who also identified key points:

  • Ready or not, here comes Nov. 16. Lots of states aren’t ready – but the deadline is not likely to be pushed back, in our speakers’ view. Contracts need to be let, insurers need to know what they have to do to sell in the exchange, and the states have to be ready a year from now to start enrolling people etc. However, HHS may be flexible – let the states make the broad decisions on time but give them more time to roll out the details. (Elsewhere I’ve heard buzz it could get pushed a few weeks but that’s just D.C. speculation)
  • States aren’t just deciding whether to run the exchange or let the feds. They have too many decisions about the exchange: How will it be governed – quasi-autonomous agency, government board, etc.? What criteria will determine what health plans are sold in the exchange? What is the role of brokers? How will in-exchange market different from the out-of-exchange market?
  • Nov. 16 is the deadline for the exchange decision making – not Medicaid expansion. States can decide on Medicaid when they want, and a state that does not do the expansion in 2014 can do so later. But, as Ario pointed out, there is no fallback for Medicaid. If states don’t run the exchange, the federal government will and the subsidies will flow. If the state doesn’t do Medicaid expansion, a lot of poor people won’t get coverage. Keep this in mind as you do your reporting. It’s important.
  • Insurers want the exchanges and they prefer that they be state run, not federally run. States traditionally have regulated insurers. “The insurers in the states are pushing hard on the states to [create their own],” Ario said. Ditto for many small businesses – some are protesting the ACA but others see the exchanges as simplifying coverage and perhaps helping to control prices but having a bigger risk pool. (Remember that businesses with fewer than 50 workers do not have to cover them. Those with more than 50 employees will have to and some of them aren’t now and don’t want to start).
  • Even the states that have been saying they don’t want to do an exchange have done a fair amount of preparatory work and research – the professionals in the health and insurance bureaucracies, not necessarily the governors’ offices. Smith, who has worked with a number of conservative states, said she isn’t aware of a single state that’s done zero exchange planning.
  • Even if Romney wins, exchanges may survive in some form and many states will build on the preparatory work they’ve done so far. But they may also demand federal money – like Romney got for the Massachusetts exchange “I believe the core concept of the exchanges will survive and move forward, even with a Romney presidency,” Ario said. Blue states could tell a Romney White House, “You ought to give us the same kind of deal President Bush gave you.”
  • If the Affordable Care Act survives, all three speakers thought the trend over time would be more state control of exchanges. Those that opt for a large federal role now will probably shift toward more local management and do so pretty quickly. As Smith said, states will conclude they’d rather have exchanges done “by us, not to us.”
  • Not only will state-run exchanges look quite different from one another, the states that opt for federally-run exchanges will also vary. The federal government will come in and run the exchange in that state – not create a single fallback federal pool for everyone in those states to become part of. And at least at the beginning, the federal exchange will include all health plans that want to come in (meeting the basic regulations and benefits). It won’t be an “active purchaser” requiring anything extra of health plans or using them in ways to bring about additional changes in health care delivery.
  • The ACA will be part of the fiscal cliff/sequester talks. The ACA includes subsidies on a sliding scale for families up to 400 percent of poverty – but expect that pool of money to be on the table in fiscal cliff/replace sequester. Ario didn’t predict that they’d be eliminated in an Obama re-election scenario. Far from it. But they could be trimmed, maybe down from that 400 percent federal poverty level. “It’s a delicate balance,” he said. “If they cut it back too far, the law doesn’t work.” The goal is to have as many people covered as possible, not few.

Here’s one story I saw taking information from the webinar and applying it to a specific state, in this case Missouri: Elizabeth Crisp in the St. Louis Post Dispatch‘s “Statehouse Buzz” If you’ve seen others, bring them to our attention.

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