States In Health-Care Tug Of War With Washington Over Program For Uninsured

The Record ( — Wednesday, January 23, 2013

The Record

Hundreds of thousands of New Jerseyans who lack health coverage will be able to buy it online starting in October on a new health insurance exchange created under the Affordable Care Act.

The program will be run by the federal government after Governor Christie decided last month that the state government would not get involved. Washington will approve the insurance carriers and the plans they offer, determine the allotment of subsidies through federal tax credits, and administer the whole process.

The exchanges, or marketplaces, are a central provision of President Obama's health care reforms, which are expected to roll out rapidly now that the election is over and serious talk about repealing the act in Congress has waned.

But opposition remains. Christie and 21 other Republican governors have declined to have their states run the exchanges where their citizens will shop for health insurance. Republican legislators in three states have also barred Democratic governors from setting up their states' exchanges. In a paradox, those most adamant about states' rights — conservative Republicans — are ceding to the federal government control over an area usually regulated by states.

"The very states that were supposed to benefit" from the Accountable Care Act's deferral to state implementation "are rejecting it, which is strange," said Sara Rosenbaum, a health policy professor at George Washington University.

Christie said he doesn't want the state to run the exchange because he is concerned that the federal government has left too many questions about the program, including the cost, unanswered.

His decision has practical consequences. Consumers will have a slightly different shopping experience than they would have with an exchange run by the state — with more choices but higher prices likely, according to experts.

Up to 400,000 buyers

About 250,000 New Jersey residents are expected to buy coverage during the exchange's first year of operation, with the total eventually reaching 400,000. That includes not only low-wage earners — those with $14,856 to $44,680 a year in income who don't get coverage through their jobs — but others who retire early, start their own businesses or work as freelancers.

They'll be able to shop online for a health plan and choose among four levels of coverage ranked from bronze through silver and gold to platinum. It's a shopping experience that is supposed to be similar to buying an airline ticket. They'll receive federal subsidies if their income is less than $44,680 for singles, $92,200 for a family of four.

"This makes insurance portable," said Jeff Brown, formerly of New Jersey Citizen Action and now with the New Jersey Health Care Quality Institute. "If someone loses their job or wants to start a small business, the exchange will be there to cover them. They'll have health insurance beyond just relying on their employer."

With the federal program, they'll probably have more policy choices to compare and the premiums will probably be higher than with an exchange operated by the state. A New Jersey-based exchange - as outlined in state legislation that Christie vetoed twice — would have vetted the plans and negotiated premiums with companies that wanted their offerings included, making them lower.

If problems or questions arise for consumers, their point of contact will be the federal agency that operates the exchange, not the state Department of Banking and Insurance or a locally appointed board of directors. Some argue that this will make the exchange less accountable. And some consumers may get tangled in bureaucracy as they shift between state Medicaid and subsidized insurance, if their income fluctuates. A state-run exchange would have integrated more neatly with state Medicaid, critics of Christie's decision say.

"It won't be the end of the world, if the federal government runs it," said Ray Castro, an analyst with New Jersey Policy Perspective, a progressive think-tank that advocates a state-run exchange, but "we're missing a real opportunity here."

Getting the word out

Most importantly, these critics say, many people who will be eligible to buy coverage on the exchange don't know about it — and New Jersey would have done a better job at reaching them if it ran the marketplace itself. A state exchange would have "a real understanding about who the uninsured are, where they are, and the best ways to reach them," said Rachel Klein, executive director of Enroll America, a non-profit partnership of insurance companies, community groups and health providers. The group plans a national campaign to make people aware of the new insurance options.

The program's success depends upon enrolling as many people as possible — healthy as well as sick — during its first year. Once coverage begins on Jan. 1, 2014, the goal is to spread the risk over the greatest number of insured people so premiums don't soar.

People likely to get subsidies on the exchange "are a little sicker than people in the [non-exchange] insurance market," said Joel Cantor, citing research by the Rutgers Center for State Health Policy, which he directs. "It's important to get this right," and offset those sick enrollees with others who are less likely to file insurance claims, he said.

When Christie vetoed the bill setting up a state exchange, he cited concerns about cost and the scope of the state's authority. It would be like buying "a pig in a poke," he said.

"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. "New Jersey cannot fairly evaluate the best or most fiscally prudent path to follow for its residents" without such information.

Like Christie, Pennsylvania Gov. Tom 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."

The costs of running the marketplace, by law, are to be borne by the federal government through 2014, after which they are supposed to become self-supporting through levies on insurance companies. Federal regulations governing the exchanges have been published, but are not final.

Although blue-state New Jersey is now in the company of red states like Texas, Arizona, Oklahoma and Alabama, Christie left open the possibility of a state-run exchange in the future, as the law allows.

The remarks from Christie and Corbett echoed the playbook of the Republican Governors Association, which represents 30 governors. The association wrote to President Obama immediately after his reelection with concerns about the insurance exchanges and Medicaid expansion, two elements of the federal health care overhaul that were left to the states to implement.

"States are struggling with many unanswered questions and are not able to make comprehensive far-reaching decisions prudently," said the letter signed by two governors, Bob McDonnell of Virginia and Bobby Jindal of Louisiana. "Many important questions remain unanswered."

'Jump right in'

Those uncertainties didn't stop 18 states and the District of Columbia from taking steps to start their own exchanges. "If you're committed to getting started, you jump right in," said a spokesman for the Connecticut health insurance exchange, Jason Madrak. "If you're ever looking for pinpoint clarity in this business, it's not going to come."

The Connecticut exchange received approval from the federal government last month.

New York also received approval for its exchange, created by executive order of Gov. Andrew Cuomo, who predicted it "will lower the cost of health insurance for small businesses, local governments and individual New Yorkers across the state." Annual savings in New York are expected to total $2.3 billion, counting both the exchange and Medicaid expansion, he said.

Kathleen Sebelius, the secretary of health and human services, said 20 states so far have received approval to fully or partly run their exchanges.

Among the states to run their own exchanges are five with Republican governors, including Idaho's C.L. Otter, who said he was trying to avoid the intrusion of "federal bureaucrats" and would revoke his decision if the Idaho legislature disagreed with him.

Seven states — four with Democratic governors and three with Republicans — chose to leave the federal government in charge of key functions of the exchange, such as managing its website and determining who is eligible for subsidies, while they perform others. These so-called partnership states are Delaware, Illinois, Michigan, North Carolina, Iowa, Arkansas and West Virginia.

But in the end, 25 — all but three headed by Republican governors — chose to leave the job to the federal government. Most saw their passive resistance as a rear-guard action to thwart "Obamacare." In the three with Democratic governors — Missouri, Montana and New Hampshire — Republican lawmakers stopped their governors from taking steps to implement state-based insurance exchanges.

The result is that federally run exchanges - which the Obama administration had seen as a fallback option for smaller states - will be the primary vehicle to bring subsidized insurance coverage to the uninsured.

No matter what form the exchange takes, "the real key is to get started," said Ward Sanders, president of the New Jersey Association of Health Plans.

"Plans have to understand what the benefit package is going to look like, so they can develop policies, figure rates and file those with the states," he said. With only nine months to go, "time is going to be tight."

Top Top | NJCA in the News | NJCA Homepage