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On Exchanges: CMS Official Sees Progress on State Marketplaces but Final Tally Yet to Come

By Jane Norman, CQ HealthBeat Associate Editor

October 5, 2012 – A Centers for Medicare and Medicaid Services (CMS) bureaucrat painted a bright picture of brisk action and state–federal cooperation on state exchange implementation at an insurers' meeting late last week.

But an exchange official from Arkansas, who was on the same panel at the state issues conference organized by America's Health Insurance Plans (AHIP) outlined the reality and complications on the ground. In Arkansas, even with a Democratic governor and Democratic legislature, a state–federal partnership will be the most that state officials will be able to muster prior to federal deadlines, given the vocal Republican minority opposed to any exchanges.

States face a Nov. 16 deadline for submitting a blueprint application to the Department of Health and Human Services (HHS) if they plan to operate their own state exchanges or state–federal partnerships. HHS is then supposed to issue conditional approval by Jan. 1, 2013, and the exchange is to be up and running by Jan. 1, 2014 under the health care law (PL 111-148, PL 111-152).

So much still hangs in the balance. Political struggles, information technology issues and the tight deadlines have proved problematic. A recent Urban Institute report said that while progress is being made, many crucial decisions about exchange design must be made prior to November.

Some Republican governors refuse to take any action until after the November election, though other GOP governors are allowing some steps forward. And CMS has not yet produced a final rule on the essential health benefits to be offered in qualified health plans in the exchanges, upsetting some states whose governors say they can't move forward with a lack of information.

At the AHIP meeting, Amanda Cowley, who deals with exchange implementation at the Center for Consumer Information and Insurance Oversight (CCIIO), praised the "tremendous progress" states have made in recent months in setting up the health benefits exchanges designed under the law to provide a market for individual and small group health insurance coverage.

Cowley said the governors of 14 states already have sent in letters to HHS Secretary Kathleen Sebelius saying they will establish exchanges and "we are actively working with those states as well as many others to complete the requirements."

The other options for states are to set up a state–federal partnership like Arkansas, or to allow the federal government to operate the exchange. "There may be a small number of states who choose not to operate a state-based exchange or a state partnership," Cowley said.

According to the Kaiser Family Foundation, as of Sept. 27, three states are actively planning state–federal partnerships while 16 are studying their options, eight have seen no significant action and eight have decided they won't create exchanges.

Cowley said her colleagues at CMS are working on the structure of the federal exchanges—building the plan management, consumer assistance functions, premium tax calculations and more. "We are consciously working very closely with stakeholders," she said, including recent open-door conversations across the country. The involvement of state insurance departments is a high priority, she said.
"The overall frequency and intensity of our interactions with states is increasing on a bit of a geometric basis," she said, including phone calls and webinars. More than 30 calls with groups of states have recently been conducted, she said.

Meanwhile, though, it's been tough going in Arkansas, a Southern state with a Democratic governor facing conservative opposition to the health care law.

Cynthia Crone, exchange partnership director, told the AHIP meeting that 78 percent of her state's residents earn less than 400 percent of the federal poverty level, which when the law goes into effect means they will qualify for subsidies to buy health insurance. It's also the third worst state in the nation in terms of health indicators and half of adults have a chronic disease, she said. Of those aged 18 to 64, a quarter lack insurance.

State officials, though, have been striving to improve residents' health care and plan for the exchange, Crone said. But even with a "popular" governor, and a Democratic legislature, politics have come into play, she said. "We have had a very vocal and active group of tea party Republicans who remain opposed to the Affordable Care Act and therefore exchanges," she said.

Lawmakers didn't enact legislation in January 2011 on exchanges because of opposition among Republicans and the insurance department appropriation was even held hostage over objections to a federal exchange planning grant, she said.

Turmoil continued over federal funding so that when the partnership model was announced by HHS, "that seemed to us like a really nice compromise," she said. "We wanted to keep insurance as local as we could." Groups working on plan management and consumer assistance were set up and have been intensely working on implementation issues during the past six months in conjunction with a steering committee set up by the governor, Crone said. An essential health benefit model was picked.

"We are on track, we believe, to get our partnership online as it should be," she said, and HHS conditional approval is expected in January.
But will the state ever move toward its own exchange, without the federal helping hand? "I don't know but I think we are in a good position to make that move should we have the political wish to do so in our state," Crone said. "We see this as really a way to help Arkansans, how we can truly improve our access, our quality and our coverage so that we improve our health."

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