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Big Menu of Health Plans or Small? HHS Exchange Guidance to Allow Both

By John Reichard, CQ HealthBeat Editor

November 11, 2010 — Joel Ario, the HHS official who is overseeing the creation of health insurance exchanges under the health care overhaul law, signaled Wednesday that guidance his office will release "within a few weeks" will encourage states to experiment with the menu of plans they will offer.

Speaking to health insurance executives in Chicago, Ario noted two different types of exchanges that illustrate opposite ends of the spectrum in terms of the menu of plans offered: Utah and Massachusetts. He suggested that the guidance will permit both approaches.

Ario told a conference on exchanges hosted by America's Health Insurance Plans that in Utah's exchange, "the emphasis is on unfettered competition and consumer choice." Utha's exchange has been likened to a "farmers' market" in which everyone who wants to sell their product can do so and charge whatever price they want. The state does not bargain with plans for lower rates.

Massachusetts, Ario noted, "is often cited at the other end of the continuum." That state's approach is to use the leverage of the exchange to negotiate for lower premiums and offer a more standardized set of products. "The point here is, the exchanges give a broad set of opportunities to the states" to experiment, Ario said.

The guidance document will also outline the "benchmarks" federal officials will consider in giving out grant money starting in February to establish exchanges. Under the health care overhaul law (PL 11-148, PL 111-152), the federal government must pay all necessary expenses to stand up exchanges. But to keep the funds coming, states must show progress in creating them.

The benchmarks include passing legislation to create exchanges, developing information technology systems, developing governance structures and creating tools to help consumers shop on exchanges.

Ario also said that HHS is going to help states by creating "technical assistance teams" to help set up the exchanges, Ario said. "We're not going to get into the middle of political decisions people are going to make" about their state's particular exchange, he added. But the teams will be ready to roll when states have decided on the exchanges they want and are ready to move ahead.

Conference attendees voiced concern about how quickly states must pass legislation to qualify for establishment grants. One audience member worried that southern states with short legislative sessions next year might feel pressure to pass exchange legislation before they are ready—just to keep grant money coming. But Ario said states will be able to demonstrate progress in other ways.

Ario also noted that assistance is coming from the National Association of Insurance Commissioners (NAIC). An NAIC committee reached agreement Tuesday on modifications to model exchange legislation, he said. The group is aiming to have the model act ready for states before their legislatures reconvene next year.

The HHS official also said some states want the federal government to operate their exchanges, but in a way that adapts to their particular marketplace. There's room for that to happen, he suggested.

Ario said he envisions "three buckets" of competitors in exchanges: insurers that compete nationally; Blue Cross Blue Shield plans operating at the state level; and provider-based insurance plans.

He told insurers that they'll find a friend in his office if they are sincere about competing on price and quality rather than on turning away bad risks as they have in the past.

AHIP President Karen Ignagni introduced Ario at the conference by praising him as a fair regulator. She noted that in addition to a law degree from Harvard, he also holds a degree in divinity from that institution—which "explains everything."

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