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Potential Growth of Exchanges a Positive Effect of Health Overhaul, Obama Official Says

By Rebecca Adams, CQ HealthBeat Associate Editor

March 29, 2011 -- If employers eventually see the insurance in exchanges as a better alternative to employer-sponsored coverage and shift workers into the new markets, it would be a positive development, Obama administration health official Joel Ario said Tuesday at a CQ Roll Call and Thomson Reuters briefing.

Ario, who heads the Office of Insurance Exchanges at the Centers for Medicare and Medicaid Services (CMS), said he doesn’t believe a move from employer-sponsored coverage would happen abruptly in 2014, the first year that the exchanges will be in operation.

Employers “will continue to provide [insurance], and we may well end up with an employer-based system for a long time because exchanges may not develop” into a robust marketplace right away, Ario said.

But Ario said he could envision a gradual move from employer-provided coverage to the exchanges if the choices available there are sufficient.

“If it plays out the exchanges work pretty well, then the employer can say, ‘This is a great thing,’” Ario said. Employers could then move workers into the exchange and feel confident that their insurance would be better than the coverage the company had provided. Ario said that he could imagine employers saying, “‘It would be good for them, good for me.’”

Ario made his remarks as he and other panelists at the morning session debated the impact of the 2010 health care law.

Ario noted employers are not required to offer health insurance, so companies are free to reduce or eliminate coverage for their workers if they choose. The main reason many employers continue to offer health insurance is because of competitive pressures from other companies for sought-after employees who value health benefits.

That will change in 2014, when the health care law (PL 111-148, PL 111-152) imposes penalties on employers with 50 or more workers who do not offer health insurance—assuming the law is not struck down by the Supreme Court. Ario declined to speculate on how the justices would rule on the constitutionality of the requirement that most Americans buy insurance or face a penalty.

Ario wrangled with former Health and Human Services Deputy Secretary Tevi Troy about whether GOP health care proposals, particularly plans to offer insurance across state lines, would work. Ario called the proposal to sell coverage across state lines a “completely vacuous, poll-tested idea.”

Earlier in the discussion, Troy said he believes Republicans would be wise to couple such an idea with a plan to cap medical malpractice awards and with tax credits that would help people afford insurance.

Republicans “know they need to have something that’s a little more serious than one that only covered 3.5 million people,” he said, referring to a House Republican plan that was discussed during the congressional health care debate.

When challenged by Ario about the feasibility of offering insurance across state lines and avoiding coverage mandates in some states, Troy defended the proposal. He said that the idea wouldn’t make a difference “overnight” but that over time it could lower insurance rates for some people, because they would be allowed to buy cheaper, less-comprehensive coverage than they can under current state laws in states such as New York, New Jersey and Massachusetts.

Ario pressed Troy on how such a plan would work, posing a hypothetical example of a New York man who felt victimized and limited by the coverage offered in his state. If that man wanted to buy an Oklahoma health plan, then the Oklahoma insurer would have to set up a new network of medical providers in New York to care for the patient.

“It won’t work,” Ario said.

Ario said the health care law offers a solution that will help Americans find coverage because the exchanges will work seamlessly with other federal programs, such as the Medicaid program for the poor.

Other panelists included John Reichard of CQ HealthBeat and Raymond Fabius of Thomson Reuters Healthcare and Science. The panel was moderated by Morton Kondracke of Roll Call.

Rebecca Adams can be reached at [email protected] .

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