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Ario Depicts Insurer-Friendly Exchange Environment

By John Reichard, CQ HealthBeat Editor

March 9, 2011 -- Health and Human Services (HHS) insurance exchange chieftain Joel Ario sought to paint an inviting picture of health insurance exchanges under the overhaul law in a speech to health plan executives, saying that ultimately they could create a marketplace of up to 100 million Americans and that states now designing exchanges are anxious to have many insurers participate.

Ario also noted that much of the technical complexity involved in establishing exchanges relates to the information technology involved. On that front, Ario and Henry Chao, the chief HHS information officer involved in creating exchanges, tried to be reassuring.

They said HHS has set up a "data services hub" to help states get access to "authoritative" data that exchanges will need to do things such as verify citizenship and determine whether consumers are eligible for Medicaid rather than for tax credits to buy insurance. And Chao, who did the IT behind the highly complex but ultimately successful Part D Medicare drug benefit, said HHS has been working closely with the Treasury Department and the IRS on IT challenges.

Ario noted in his remarks, made at a meeting sponsored by America's Health Insurance Plans, that exchanges, scheduled to open in 2014 under the health care law (PL 111-148, PL 111-152), initially will have 15 million to 20 million customers. But if they work well, they ultimately could include up to 100 million people. Under the health care law, after several years states will have the option of opening up exchanges to larger employers.

Ario's remarks followed a letter from 21 Republican governors complaining that the law is too restrictive about how exchanges will function. Ario denied that, adding, for example, that no state is trying to limit the marketplace to one insurer. All the states want "robust competition," he said.

He noted that some analysts say it is a mistake to have too many choices because it confuses consumers. But Web technology on sites such as Travelocity for picking airplane flights lets users easily deal with a large number of choices, using screening questions that narrow down choices, he said, adding that the same approach can be taken in dealing with insurance options.

Exchanges also offer insurers an opportunity to create commercial-type products for the Medicaid market, he said. Under the health care law, many people are expected to move from Medicaid to commercial products purchased with tax credits and back again as their income levels fluctuate. Insurers can design commercial products that allow consumers to stay in the same plan to help them weather such transitions, analysts say.

Ario asserted that the exchanges will accommodate health plans with high deductibles, which Republicans often tout as a way to better restrain heath spending by putting more consumer "skin in the game." The bronze tier of health plan options to be offered by exchanges creates plenty of opportunities for such "consumer-driven" health plans, he said.

Ario said that states can start applying for HHS grants later this month to help them establish exchanges. Self-described "pace car" states such as Oregon, California and Wisconsin, which are farther along with exchanges, are expected to apply for multi-year awards. States that want to move more incrementally can do so. They can apply for less money every quarter to work on smaller pieces of the creation effort, he said.

Ario listed 11 areas that states can concentrate on incrementally: background research on the insurance market, stakeholder consultation, establishing legal authority for exchanges, governance of exchanges, the integration of Medicaid and private insurers in exchanges, IT systems, market regulatory revisions, consumer assistance, business operations, oversight and program integrity, and sound financial management. But by June 2012, all states will need multi-year grants given the deadlines they face for exchange creation, he warned.

Notable by omission in Ario's remarks was any reference to a proposed rule on exchanges. States and insurers are looking to that proposal to get a clearer picture of the obligations they face. Ario said late last year that the rule would be proposed this spring. His failure to mention it suggests that timetable may not be met.

Ario said that 35 to 40 states have legislation pending or laws enacted to create exchanges. If they get legal authority for exchanges and a governance structure established this year, they will be in position next year to make other operations decisions.

In general, he described 2011 as the year to begin building exchanges and 2012 as the year to begin testing them. "We're definitely moving toward an implementation phase here," he said. A state must demonstrate to HHS by Jan. 1, 2013, that it will have a viable exchange by Jan. 1, 2014, or the federal government will operate that state's exchange.

IT Challenges
States can't wait around until 2012 to start working on IT, however.

Chao, chief information officer at the Center for Insurance Information and Oversight at the Centers for Medicare and Medicaid Services, was introduced at the meeting as a surprisingly calm presence in light of the big IT challenges.

Chao said the IT effort he oversaw for Medicare Part D "was a great warm-up exercise."

"The challenges are not insurmountable," Chao said. "I think it requires a different degree of collaboration and information sharing, particularly at the starting stages of taking this on.

"Over the past eight months or so, we've been closely collaborating with the IRS, looking at what I would call the front part of the exchange, the eligibility and verification aspect of it; the back part of the exchange operation, which is reconciliation of the . . . tax credit; and really trying to come together on what that operational scenario is going to look like."

Chao added that "after eight months, we've made some significant progress, albeit there are outstanding policy issues that are being discussed. I don't think that the details necessarily prevent us from being able to make advances in assumptions about how architecture and process will work."

Chao has a decade of experience at HHS working in the Medicaid program, which should be helpful in dealing with information challenges relating to determining Medicaid eligibility.

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