By Jane Norman, CQ HealthBeat Associate Editor
August 2, 2010 -- The state exchanges that will serve as health insurance marketplaces under the health care law may differ in major respects from state to state, panelists at an Alliance for Health Reform briefing said Monday. At the same time, cash-strapped states are struggling to understand the many pieces of the sweeping law they're expected to implement and monitor, often with not enough time or staff.
"What this has really meant for a lot of states is more caffeine, less sleep and a lot of time on the phones," said Lorez Meinhold, the director of health care implementation for the state of Colorado.
The new law (PL 111-148, PL 111-152) establishes a minimum federal floor on many policies and leaves it up to states to stay there or go beyond, said Brian Webb, manager for health policy and legislation for the National Association of Insurance Commissioners. "It really is now back on the states," he said.
The briefing on the Hill sponsored by the nonpartisan alliance and the Robert Wood Johnson Foundation focused on the problems and challenges that states face in putting in place the health law, and there appear to be plenty — as well as plenty of choices.
The exchanges are an important underpinning of the law, in that they'll provide access for consumers to purchase affordable insurance. The Department of Health and Human Services announced last week that it is offering $51 million in grants for which states can apply to start the process of setting up their exchanges.
Len Nichols, a health policy expert from George Mason University, said states must create exchanges by March 23, 2012, though they will not be operational until 2014. States that decline to do so will have to take part in exchanges established by the federal government.
"That's a signal — if you choose not to create it, the feds will come and do it," Nichols said. "You have a choice about whether you want to make that exchange truly live and breathe and reflect state reality or whether you want to be directed from Washington." States can choose whether to run it themselves or have a nonprofit operate the exchange.
States' "maybe single most important power" is deciding who will participate as well, he pointed out. The government defines the regulations but states decide who satisfies the regulations, Nichols said. "I predict it will be a little bit different in Utah than it is in Massachusetts, and I also submit that's probably OK."
There already are indications that some states where the movement to repeal the law is strong may not move to set up exchanges. Republican Nebraska Gov. Dave Heineman has said he doesn't know if the state will apply for the grant money to establish an exchange, for example.
States are just beginning to explore how their exchanges will work, panelists said. "What are the values? What are the things you want the exchange to address?" said Meinhold. Colorado can't even begin to contemplate whether it should be in a regional exchange, which is also allowed under the law, she said.
"We talked to Utah and New Mexico, but we don't even have a vision as a state about what we want," she said. "So really, to start having a conversation with other states about they want, and to get an agreement, all within three years, and an electronic interface that works, scares the bejesus out of most states. The technology of some of these requirements is an overwhelming endeavor."
No states feel prepared yet for the challenge of implementation, said Nichols. "I think all of them, regardless of public rhetoric, are checking out their options," he said.
Webb of the National Association of Insurance Commissioners also suggested that if insurance companies attempt "driving a truck" through regulations on medical-loss ratios (MLR) set by the government, state regulators may ask that the Department of Health and Human Services return to regulations and "tighten them up" to prevent abuses. "There's no real process in the law for doing that in the future, but we're working with HHS to make sure we can," he said.
Under the MLR, beginning in January, large-group plans must spend 85 percent of premiums on clinical services and activities related to quality of care, with just 15 percent devoted to other items such as salaries, administrative costs and profits. For small-group and individual plans, 80 percent of premiums must be spent on clinical services and quality of care and 20 percent on anything else. Rebates will have to be paid by the companies if the percentages are not met.
The NAIC is currently in the process of trying to form recommendations on those regulations, which Webb said should be finished by "the end of summer," though he wouldn't define that would be. "Is that end of the school summer? Labor Day? Or is that the sun summer, like Sept. 22? We are doing our best," he said. The group intends to begin collecting information on insurance company spending by April 2011, he said.
Sen. John D. Rockefeller IV moderated part of the panel and at one point quizzed Jay Angoff, head of the HHS Office of Consumer Information and Insurance Oversight, on how the MLR regulations will be enforced over time. "It is an important issue," replied Angoff, refusing to elaborate further despite probing by Rockefeller, a West Virginia Democrat who has expressed continued interest in tough action against insurers.
Meinhold said that her state's goal is to have the law fully implemented by 2020. The law will require state agencies to work together and cooperate in unfamiliar ways, and an implementation plan is needed, she said. In addition, many governors and state legislators won't be in office in years to come, and the law is not a focus on the campaign trail, so states need to form a blueprint as to what happens next to ensure momentum continues, she said.