Obama Win Means Sweeping Health Overhaul Moves Ahead in States
Reluctant insurers must press forward accordingly as they now have nine days to advise the federal government how they plan to manage state-run exchanges.
Insurance Networking News, November 7, 2012
President Barack Obama's re-election means his overhaul of the U.S. healthcare system, opposed by most Republicans, will move ahead in all 50 states, with or without the cooperation of their governors.
State officials who held off implementing some aspects of the 2010 Affordable Care Act now face pressure to make decisions almost immediately. They have nine days to advise the federal government how they plan to manage state-run exchanges created by the law to provide medical coverage to the uninsured, or face a de facto U.S. takeover of their insurance markets.
With Republican candidate Mitt Romney promising to repeal the law, all but 13 governors had taken a wait-and-see approach. Now those that "thumbed their nose" at the president must quickly reassess, said Mississippi Insurance Commissioner Mike Chaney, a Republican who said he will submit a plan for his state's exchange by the November 16 deadline.
"The message to governors is the verdict is now in," said Ron Pollack, executive director of Families USA, a consumer advocate that backs the law. "The Affordable Care Act is moving forward. Either they help cooperate with its implementation, or people in their state could be left out in the cold."
In addition to playing catch-up with Obama, states would also need to keep pace with hospitals and insurance companies. Hospital chains like HCA Holdings Inc. and insurers including UnitedHealth Group Inc., the biggest private provider of health benefits, have spent millions already on technology, marketing and plan development to prepare for the new business.
"Our priority for the organization is to get the organization ready to both comply with and play in target markets from an exchange standpoint," David C. Cordani, CEO of Bloomfield, Connecticut-based Cigna Corp., told analysts on a November 1 conference call. "But we're keenly focused on the amount of moving parts that exist within the regulatory environment and within the state and federal environment over the next two to three quarters."
Thirty-four states have accepted at least two grants from the federal government to start planning an exchange, according to the U.S. Department of Health and Human Services. That puts about 20 states in a position to build an exchange or partner with the federal government on one, in addition to the 13, plus the District of Columbia, who have already said they'll run their own.
The rest "have either explicitly said 'no' or have taken so few steps that you can't really see them shifting quickly enough to play an active role," said Alan Weil, executive director of the National Academy for State Health Policy, which assists states implementing the health law, in an interview.
Governors who don't meet the Obama administration's deadline will see the federal government set up exchanges in their states that will decide which insurers can sell plans to their citizens. The federal exchange will also control enrollment of low-income people into state Medicaid programs.
"We still haven't seen proposed regulations in a couple of critical areas," said Alissa Fox, SVP for lobbying and policy development at the Blue Cross Blue Shield Association in Washington, a trade association for 38 state Blue Cross and Blue Shield insurance companies.
"What the states have to do and what the plans have to do, in designing and having products ready to market, a huge undertaking has to happen," she said.
Obama's victory over Romney removes most of the remaining uncertainty about the Affordable Care Act that lingered since the law largely survived a challenge before the Supreme Court in June. Obama will enjoy a Senate that's still controlled by his Democratic Party, meaning any legislation attacking the health law that is passed by the Republican-led House will die in the other chamber, as it has for the past two years.
With the threat of repeal gone, Obama may be more willing to grant states greater flexibility, or even delay some of the law's provisions, to ensure it can be implemented successfully, said Paul Keckley, executive director of Deloitte LLP's Center for Health Solutions research group in Washington.
The administration may consider giving governors more time to set up exchanges, Keckley said. Or it may be willing to accept a more lenient definition of exchanges to get their systems up and running. In the end, Keckley expects few states will cede the new insurance markets to the federal government.
"The federal government doesn't want to run the exchange," Keckley said in a telephone interview. "The federally run exchange was always meant as a backstop. To set up and run that federal exchange, they would have to go through the usual appropriations process in Congress. That's a whole new battle, and I don't think anyone in the administration is interested in that."
One potential area of compromise: the administration hasn't said what benefits health plans will have to cover, instead allowing states to set a benchmark based on small-business plans already available to their residents. Obama could give states more leeway to define benefits, or cite the continuing process as a reason to delay the exchanges, Keckley said.
The health law isn't entirely free and clear of changes. Obama and Congress face a combination of tax increases, spending cuts and a federal debt-limit that will require negotiated legislation to ameliorate.
It will be difficult for Obama to keep the health law out of those discussions, said Mike Tuffin, an APCO Worldwide managing director who used to be a vice president at America's Health Insurance Plans, the industry's main lobbying group in Washington.
"That law has so many tentacles, in terms of spending and the revenue side, that it is by default going to be impacted by a deficit reduction deal," Tuffin said in a phone interview. "If the Obama administration is saying everything is on the table, everything can't mean everything except the Affordable Care Act. It's just too big."
Provisions of the law that could be scaled back in a budget deal include subsidies for insurance plans bought in the exchanges. Currently, families earning as much as four times the poverty level, or $92,200 for a family of four, are eligible for subsidized plans.
In addition, insurers and state insurance commissioners are already lobbying the administration and Congress to widen the range of premiums that people in the exchanges can pay. The law currently limits premiums for older adults to three times the premium paid by young people. Insurers say the maximum ratio should be five-to-one, so that policies for young people aren't so expensive that they stay out of the market.
"It's possible—hope springs eternal—that they could come together," said Kansas Insurance Commissioner Sandy Praeger, a Republican. With Obama's final term assured, "there's no percentage in trying to thwart everything the president wants to do. We'll have some deadlines looming and people will be more engaged in seeing what some of the law's benefits are."
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