By John Reichard, CQ HealthBeat Editor
October 18, 2011 -- The HHS official in charge of overseeing the creation of insurance exchanges under the health care law emphasized Tuesday that a federal exchange will be ready to step in to the extent states don’t have their own new marketplaces ready to offer insurance choices to the uninsured by Jan. 1, 2014.
“There’s been a lot of backing and forthing in the press saying the feds won’t do it, it’s not going to happen, we don’t have the ability. Well, I’m here to tell you all of that isn’t true,” Tim Hill told a health care conference sponsored by the American Bar Association (ABA). Hill is deputy director of the Center for Consumer Information and Insurance Oversight at the Centers for Medicare and Medicaid Services.
“We’ve made investments in 2011, we’re making further investments in 2012—in terms of IT, business process, resources that are needed to be able to bring up the exchange,” Hill said. All the things that need to happen to develop a federal exchange are moving forward, he declared.
While the feds are trying to dispel all doubt about whether they will be ready to step in, they are eager to portray themselves as loath to push states around in deciding how exchanges are run. Hill’s mantra during his remarks was that HHS wants a “consumer-centric, state-based exchange.” One size does not fit all, he said, adding that exchanges should be customized to fit the particular insurance market of the state involved.
Hill said officials view the exchanges as an opportunity to make the process of buying insurance unlike anything consumers have ever experienced before. “We want it to mirror and be like any other commercially based transaction that they have today, whether it’s buying a book on Amazon.com or buying a pair of shoes or getting their automobile insurance through Geico,” he said.
The fact is, though, that many states appear to be dragging their feet in creating exchanges. Only 17 have applied for and received “establishment grants” to begin creating them. On Sept. 30, several more applied for those grants. Only 14 states have exchange laws in place. In two other states—Indiana and Rhode Island—governors bypassed their legislatures and issued executive orders to create exchanges, according to an industry tally.
But even the state exchange laws that have been enacted do not address all the details involved in setting up the marketplaces.
In the case of Indiana, there is no commitment to actually create an exchange but only to plan for one.
A handful of states are moving eagerly ahead, said Colleen Gallaher, an official with America’s Health Insurance Plans.
Oregon, New York and Maryland applied for and received establishment grants and “early innovator” money to do pioneering information technology work that other states can copy. “They’re really riding hard and want to get to the finish line, and quite honestly, I think they will,” said Gallaher.
But because of the complexity, lack of certainty about what health plans will be required to offer, and legal challenges to the health care law (PL 111-148, PL 111-152), most states haven’t shifted into high gear.
One questioner at the ABA forum prodded federal officials to say more about what the federal exchange would look like as an incentive to get more states off the dime. The thought is that if the federal exchange is in some way too heavy-handed, states will move faster to set up their own marketplaces.
But Hill broke no new ground in saying what the federal exchange would look like. He referred one reporter to a set of slides presented to state officials at a recent meeting with HHS that did not address some of the things states most want to know, such as whether the federal exchange would be an “active purchaser” that would exclude insurers who don’t offer consumers a good deal.
Gallaher’s remarks carried a strong undertone of uncertainty about whether states—and therefore insurers—will be able to do everything they are being asked to do under the law. She noted that insurers will have to be ready by June of 2013 to file bids to offer coverage on exchanges, with open enrollment to begin that fall. They do not yet know what benefits they will have to cover, among many other questions, including the extent to which federal officials will cushion insurers from losses when they first enter the unfamiliar exchange market.
But states have tighter deadlines. Gallaher noted that states must get HHS certification by Jan. 1, 2013 that they will have a viable exchange ready a year later. “We cannot stress enough that 14 months is hardly enough time to really have mapped-out and sourced-out and vendored- and contracted-out the build-it requirements of an exchange,” she said.
John Reichard can be reached at