NJ Spotlight

Citing New Concerns About Costs, Christie Vetoes Health Benefit Exchange Bill — Again

Critics dismiss governor's appeal to fiscal prudence as just another delaying tactic

NJ Spotlight — Friday, December 7, 2012

By Andrew Kitchenman

Gov. Chris Christie vetoed the Legislature's health benefit exchange bill on Wednesday, saying he wants answers to questions about the potential cost to the state of the exchange — a key component of the Affordable Care Act.

But backers of the bill — a mix of Democrats and healthcare advocates — said that Christie has already vetoed similar legislation, and many of his objections were addressed in the most recent version of the measure.

"The governor's veto is the latest in a long line of delays — with ever-changing reasons," said Raymond Castro, senior policy analyst for New Jersey Policy Perspective, a think tank focused on the needs of low- and moderate-income families.

Christie's announcement came on the deadline for taking action on the bill (S-2135). But he will have other opportunities in the next few months to take action on creating a statewide health exchange — a virtual marketplace where individuals and small businesses can purchase private or subsidized insurance.

The U.S. Department of Health and Human Services has set a December 14 deadline for states to determine whether they will operate their own exchanges, or leave it to the federal government to provide one.

But New Jersey and other states have until February 15 to decide whether to enter into a partnership with the federal government. This arrangement would give the state responsibility for managing the exchange and assisting consumers, while the feds would oversee applications, enrollment, and financial management.

Unanswered Questions

In his veto announcement, Christie said the federal government hasn't given states enough information to decide whether to have a state-operated exchange, a federal-state partnership or one run only by federal officials.

"I will not ask New Jerseyans to commit today to a state-based exchange when the federal government cannot tell us what it will cost, how that cost compares to other options, and how much control they will give the states over this option that comes at the cost of our state's taxpayers," Christie said.

Castro sees things from a different perspective.

"The first exchange bill was vetoed so the governor could wait for the U.S. Supreme Court decision." he said. "After the court upheld the Affordable Care Act, the governor said he wanted to wait to see if a Romney presidency would successfully dismantle the law," he continued. "Now the governor says the state has not received enough information from the federal government."

The exchange website would make it possible for individuals and small business owners to research and purchase health insurance.

The sites would also let residents determine if they are eligible for subsidies to purchase insurance. Subsidies will be available to residents whose income is between 100 percent and 400 percent of the federal poverty line, currently between $23,050 and $92,200 for a family of four.

The legislative battle over the bill has focused on the authority and composition of the board that would oversee it. Consumer advocates supported the bill, in part, because the board would be made up of experts who didn't have a financial stake in the insurance industry. They also praised a provision stipulating that the board certifies plans with the "optimal combination of choice, value, quality, and service to enrollees."

However, insurance industry officials said the board should include industry representatives, and that residents should be given the ability to choose their own plans without the board limiting the selection.

Christie wants answers to a series of questions posed by the Republican Governors Association. These include: What will be the cost of state-federal partnerships? How will federally run exchanges operate? And how does the administration plan to pay for exchanges when Republican members of Congress have said they would block funding?

Christie has said that the Affordable Care Act will be the law of the land after Obama's re-election and that his opposition to specific bills was not an effort to thwart the ACA's implementation. However, at a press conference on November 19, Christie said he "wouldn't buy a pig in a poke."

"If they're willing to answer the questions, and I can evaluate how much it's going to cost, then I might be inclined to do a state-run exchange," Christie said of federal officials. "If they're unwilling to answer the questions for me, then they're going to run it."

A key point is how the exchange will be funded. To pay for federally operated exchanges, federal health officials recently proposed a 3.5 percent fee on insurance purchased through the exchanges. In the veto announcement, Christie administration officials questioned if a similar fee would be shared with state governments in partnership exchanges.

Working with the Feds

Federal officials have emphasized that they want to work with states to make it easier for them to establish exchanges.

"We have worked with all states to provide the flexibility and resources needed to set up affordable insurance exchanges and will continue to do so in the months and years to come," said Fabien Levy, spokesman for the U.S. Department of Health and Human Services, in response to Christie's veto statement.

"Most states will take an active role operating their exchange and many states have already made good progress," he added. "Consumers in every state will absolutely have access to an exchange come January of 2014."

Federal officials are providing grants to states to establish exchanges. New Jersey has received $8.67 million to plan for an exchange, while Connecticut has received $152 million to establish one.

Bill sponsor Sen. Nia H. Gill (D-Essex and Passaic) said the legislation struck the right balance in serving an estimated 440,000 residents who would receive insurance from an exchange.

"The bill vetoed by the governor allowed New Jersey to maintain regulatory control over insurance to the greatest extent possible, to respond to market conditions, to ensure competition, and to define plans that best meet the needs of New Jersey residents," Gill said in a statement.

Christie's veto also met with praise. The New Jersey Association of Health Plans, which represents insurers, was concerned about the composition and authority of the managing board.

"The bill that was vetoed today went well beyond the requirements of the Affordable Care Act in ways that we feel would have raised the cost of coverage, limited consumer choices, and added unnecessary bureaucratic procedures, so as a result, we supported the governor's veto," said Wardell Sanders, the association's president.

Sanders has said that the association does favor a state-controlled exchange, but one with industry expertise on the board and without the authority to limit the selection of plans beyond those that provide essential benefits.

While insurance companies were concerned that the bill would have given the board authority to limit the number of plans in the exchange, consumer advocates said it was necessary to protect consumers.

The veto was met with disappointment by those advocates, who played a major role in shaping the bill.

Jeff Brown, coordinator of policy advocacy and communications for New Jersey Citizen Action, said state officials can look to the example of Massachusetts — the first state to establish an exchange — to understand that it will not be too costly. He added that federal funding would make the startup costs lower than they were for Massachusetts.

"I don't think there was anything in the bill that was onerous or would explode costs," he said.

Protection and Competition

Assembly sponsor Herb Conaway Jr. (D-Burlington) said the bill would have coupled strong consumer protection with a "vibrant, competitive" exchange.

"It would have also positioned New Jersey residents and small businesses to receive billions in federal tax credits to purchase insurance," Conaway said in a statement. "But, for the second time this year, the governor has stood in the way of that."

Rutgers School of Law-Newark assistant professor Christina Ho, who worked for the Clinton administration as well as Senator Hillary Clinton on health policy, said it makes sense for the state to control the exchange, since state officials have a better understanding than the federal government of state insurance regulations.

She said she was disappointed with the governor's veto, as "There was an opportunity for the governor to allow the state to move forward," Ho said. "I think now there's going to be a lot of bureaucratic inconsistencies and inefficiency."

What's more, Ho said Christie's action served the interests of conservatives who are trying to block each piece of the ACA. She noted that in the past, there weren't partisan attempts to undermine major legislation such as Medicare and Social Security.

But Christie's veto comes amid an increasingly partisan alignment on how states are reacting to the Affordable Care Act. Mississippi is the only state with a Republican governor that has indicated that it will create a state-based exchange. While Mississippi Gov. Phil Bryant opposes an exchange, state insurance commissioner Mike Chaney is pursuing one over Bryant's objection.

Americans for Prosperity New Jersey director Steve Lonegan, who has campaigned vigorously against the ACA, praised Christie's veto, calling it a "huge blow to the federal takeover" of healthcare. Lonegan has pushed for Christie to oppose each piece of the Affordable Care Act, as part of a broader effort to repeal the law.

"In so doing, Gov. Christie has exposed a major weakness in the Obamacare system. The organizers cannot even adequately explain how the federal government will operate the simplest component" of the law, Lonegan said.

Other supporters of state-based exchanges had a measured response to the veto. The New Jersey Hospital Association has consistently supported implementing a state-based exchange, while also saying that the concerns raised by Christie are legitimate.

New Jersey Hospital Association spokeswoman Kerry McKean Kelly said hospitals understand that Christie is aiming to be fiscally prudent and wants more information from the federal government.

"We are glad to see the governor indicates an openness to reassess the state's role when more information because available from the feds," McKean Kelly said. "For us, the important thing is we look forward to having a robust exchange here in New Jersey. Whether it's run by the state or the federal government, the bottom line goal is to have an exchange that will provide the information and resources that people need to access health insurance."

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