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Exchange Overseer Ario Aims to Help Heal a Broken Market

By John Reichard, CQ HealthBeat Editor

December 16, 2010 -- Running any enterprise is an exercise in finding the right balance between being firm and being flexible. If you're not firm enough, the enterprise won't move forward; if you're too firm, it will break down.

For Joel Ario, the enterprise is carrying out the health care law requirement that insurance exchanges be up and running in every state by 2014.

Ario, who is head of the Office of Exchanges at the Department of Health and Human Services, must find that balance in dealing with many different players whose cooperation he will need to make exchanges successful.
It's quite a lineup: officials from 50 states with different ideas about how exchanges should work; insurers historically hostile to exchanges; small businesses and the individual consumers who will shop at exchanges, and hospitals and other providers looking to make up losses from Medicare cuts with newly insured patients enrolled in health plans offered on the exchanges.

Affable, quick, and business-like, the 57-year-old Ario appears to have the temperament and experience to get the job done. Whether he has the tools, however, is uncertain. States worry about the funding, staffing, and technical expertise needed to operate effective exchanges. Republicans don't like the blueprint the overhaul law creates for these new insurance marketplaces. And the timelines are deceptively tight.

But Ario says the law allows the experimentation needed to make states willing partners. He says it structures the exchanges in a way that will draw in many consumers. And insurers have too much riding on the success of exchanges to let them fail, he adds.

"If this doesn't work, I don't think very many of them believe that we'll go back to a system in which they will be more in charge, rather than less in charge," Ario said in an interview.

For Ario, exchanges are a way to heal an insurance market that is broken. Millions of Americans not on the payroll of the federal government or big businesses can't get access to affordable, comprehensive coverage. Exchanges, which spread treatment costs across large pools of people, "are a powerful antidote," he says.

But however much insurance companies have riding on the success of exchanges, these companies are run by executives who must meet short-term profit goals. If insurers think exchanges are going to get in the way with heavy-handed regulations, they have GOP allies in Congress only too happy to go after all things "Obamacare."

That means federal officials like Ario will have to have a deft touch with insurers. And that requires a practical understanding of what insurers need to operate.

At first glance, he might not seem like the guy for the job.

Divinity School, Harvard Law, and "PIRGs"

Take a quick look at his background and Ario might seem like a paranoid insurance executive's worst nightmare—a guy with a Harvard Law degree apparently eager to take on corporate America, and maybe even a person who thinks he has some kind of divine calling to do it. After all, he enrolled in Harvard Divinity School before getting his law degree.

If anything, the divinity school experience seems to reflect a drive to question and analyze dogma, not to rigidly force it on people. And while Ario is willing to reflect on his experience at divinity school when asked, he doesn't call attention to it in the speeches he gives.

A chuckling Ario says that people make fun of him because his divinity degree came before law school, suggesting that it should have been the other way around because "after law school you need to go cleanse yourself."
A 1975 graduate of St. Olaf College in Northfield, Minnesota, Ario said that one of his college professors suggested he go to divinity school.

"I said, 'why would I do that? I was confirmed...but I haven't really paid much attention to the church all the way through college.' And he said 'Because you ask the kind of questions people ask in divinity school.'" Ario got a full scholarship through a program designed for people willing to seriously consider the ministry who otherwise would have gone into another profession.

"I said at that point, 'well, I'm an interested agnostic.'" At divinity school Ario found "my professor was right. These guys ask exactly the kinds of questions I'd ask"—questions on "the meaning of life, and social justice, and how you make a good life for yourself, and how do you make for a good society."

"My best buddy at that point wanted to be a Lutheran minister and he'd come home and complain about how Harvard divinity school was not training ministers. I'd say, 'I know. It'd be boring if everyone just wanted to learn how to be a minister. This is a place to search your soul and answer the big questions. So I did that for three years,'" Ario said.

"I kind of thought about the ministry, and considered it, even prayed about it, but it was never a close call."

"Reinhold Niehbuhr said the purpose of the ministry is to comfort the afflicted and afflict the comforted. I was always good at number two and not so much at number one, either in my own life or for others...I just couldn't be pastoral with somebody who lost their two-year-old kid for no reason. I mean I'd be angry about that."

But Ario said even though he didn't become a minister, the divinity school training has had a lasting impact on his career, including in his current post.

"It's made me very nimble in the way I look at issues. You can be in a lot of situations where you're trying to think through an issue and there's the received wisdom on the issue. I want to question why you're starting with the assumption behind that question, let's back up and think about first principles. I use that all the time when people get into kind of group think about an issue where it seems like the premises are too narrow."

"Afflict the comforted" was a theme of his career after he graduated from law school in 1981. He organized and ran Public Interest Research Groups (PIRGs), Ralph Nader inspired organizations which lobby for consumers on product safety, public health, the environment, and other issues. After organizing a PIRG in Wisconsin and directing Oregon's PIRG for seven years, Ario moved into state government in Oregon where he worked on an overhaul of the small group insurance market that instituted "guaranteed issue" provisions.

Several years later, he was named the top insurance regulator in Oregon, serving in that position from 2000 to 2007. He was Pennsylvania's insurance commissioner from 2007 to 2010.

A Flexible Approach

State insurance regulators must protect consumers. But they also have to safeguard insurers by taking steps to assure their solvency. That may mean no knee-jerk denials of rate hikes, for example. To do their jobs, regulators must develop a sophisticated understanding of how insurance companies work and apply regulations in a way that doesn't severely disrupt markets.

"As regulators, we don't have the luxury, the time, or the capacity really to be ideological," said Illinois Insurance Director Michael T. McRaith, who worked with Ario on exchange issues at the National Association of Insurance Commissioners earlier this year before Ario was named to the HHS post.

Ario "is an excellent listener, open to learning and hearing different angles of one specific issue. More importantly perhaps is that Joel is guided by priorities and principles but is very practical in his approach to problem solving," says McRaith.

An interest in dialogue, in re-examining assumptions, and a pragmatic knowledge of insurance markets suggests that Ario isn't a rigid moral crusader to be feared by insurance executives. And some in the industry even say nice things about him. At a conference of industry executives in November, America's Health Insurance Plans President Karen Ignagni introduced Ario by praising him as a fair regulator.

He earned similar praise during his tenure as Oregon's insurance administrator. "I'm from an association that deals with regulators in nine states, and Joel is No. 1," said Clark Sitzes, executive vice president of the Vancouver-based Professional Insurance Agents Western Alliance, in a 2006 profile of Ario in the Portland Business Journal. The alliance represents 1,000 independent property and casualty insurance agents in nine states. "He's receptive to our opinions and concerns where others are less so."

Ario emphasizes that he wants states to take advantage of the overhaul law's provisions that allow for the creation of exchanges that reflect their particular markets. Even states that choose to let Washington run their exchanges will be closely involved in any federal effort in that regard, he says.

Two states have signaled that they won't do their own exchanges by not filing for initial planning grants. But Ario said he expects that officials in one of them, Minnesota, will reverse that decision now that there's a new governor. Democrat Mark Dayton is replacing Republican Tim Pawlenty, who may run for president in 2012 based in part on his opposition to the health care overhaul law. Ario says he hasn't given up on the second state, Alaska, opening its own exchange either.

Ario adds that some states may take advantage of the flexibility the overhaul allows to create regional exchanges. Thus Maine, New Hampshire, and Vermont, for example, which have similar regulatory schemes, might take a regional approach toward some exchange functions while performing others themselves. Similarly, "spine of the West" states like Montana, Wyoming Utah, and New Mexico might join in a regional effort, he said.

The law also permits states to decide whether or not to combine individuals and small businesses in the same exchange. Pooling different groups raises concerns among one or the other that their costs will go up. Ario suggested that states will be cautious about doing so. "Most people would have a bias toward saying, 'Let's not create new changes in the marketplace until we're sure they can work."

Ario sees states moving ahead to create their own exchanges even as many Republicans hostile to the overhaul law move into state houses next year. "There's all this talk now about governors changing, and is everything going to change—well, most of the people who do the day to day work don't change every time the governor changes." Staff in state agencies such as the insurance department, Medicaid, and the health department "know that this law will make things better. That's where our focus is, to get in with those people."

Skepticism and Doubt

As open as Ario might be to discussion, and as much as the overhaul might allow some experimentation, insurers are wary of the Obama administration. And state officials are worried that they don't have the know-how and the resources to prove to HHS by the January 1, 2013 deadline that they'll have an effective exchange ready to go by 2014. If they can't, the feds must do the job.

A veteran managed care executive who requested anonymity said "most of us are reserving judgement" about Ario. The executive said he thinks Ario prefers the "prudent purchaser" type of exchange in which insurers who don't offer low enough premiums can be excluded from participation. The overhaul law lets states decide whether they want that kind of exchange, or whether they will basically offer all plans that meet certain basic requirements.

Insurers feel burned by the administration after the Centers for Medicare and Medicaid Services rejected certain plans' bids to participate in the Medicare Advantage program earlier this year. The affected plans complained that they were given little time to revise their bids and had no specific guidance on how to make them acceptable. That kind of unpredictability could be a hallmark of prudent purchaser exchanges, the executive said. "It's the same issue; it's just playing out in different contexts."

The executive acknowledged that states have the power to reject that model. In states with Republican governors and Republican legislatures, exchanges probably won't follow the prudent purchaser model. "But it is an industry concern," he said.

Ario also has come in for some criticism from the state of Louisiana.

"We still don't have the most basic set of guidance from HHS on setting up an exchange, said Louisiana Secretary for Health and Hospitals Bruce Greenstein on Nov. 30, Greenstein made the comment despite the issuance by HHS of "preliminary guidance" on exchanges.

States have to tap into various data sources held by federal agencies to handle enrollment in plans offered by exchanges and to pay subsidies to buy coverage.

"We don't know how information from the Social Security Administration gets transmitted, what the definitions look like with regard to certain income types,'' Greenstein said. Systems to establish eligibility of consumers for the exchanges and the subsidies they provide "are hard to spec out without having more guidance,'' he added.

The managed care executive said that the HHS preliminary guidance document "was necessary, but not sufficient. It didn't do enough. All of this data is supposed to interchange at the state level. Are the feds going to make that happen? If that capability is not funded and put in place very soon, you're not going to have an efficient exchange."

But Ario and his office are stepping up their meetings with state representatives from 44 states on exchange issues. More grant money and guidance is in the works.

A Moral Dimension

States and insurers can expect pressure from Ario to perform, despite his willingness to be flexible. Ario doesn't deny that he sees a moral dimension to the job he's doing either.

"I have the capacity to see most issues that I work on as having a missional aspect to them and can be preachy at times," he said. "I try not to be but I can be," he adds softly.

"If you ask me the basic thing, I thinks it's a travesty that we live in a country that hasn't figured out how to cover everybody in the system and also make the system affordable for everybody."

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