Obama Administration Issues Rules for State Health Insurance Markets

March 13, 2012 - 1:25 AM
Health Overhaul States

FILE - In this March 23, 2010 file photo, President Barack Obama signs the health care bill, in the East Room of the White House in Washington. Tackling a huge logistical challenge, the Obama administration Monday released an ambitious blueprint for states to match up uninsured Americans with coverage that's right for them under the health care overhaul law. The long-awaited regulation, released as the Supreme Court prepares to hear a challenge to the law, stresses state and federal flexibility. (AP Photo/J. Scott Applewhite, File)

WASHINGTON (AP) — Do it your way, but get it done.

That's what the Obama administration is telling the states when it comes to carrying out the new health overhaul law that will eventually cover most of America's 50 million uninsured people.

Democratic state officials are praising the flexibility in federal rules issued Monday, a long-awaited blueprint for state health insurance markets where millions of consumers will shop starting in 2014. States have a range of options for designing and running the new markets, called exchanges.

"Allowing states to continue to regulate their insurance industry and protect consumers is critically important," said Monica Lindeen, Montana's insurance commissioner and a Democrat. "States have 150 years of experience regulating insurance. The more states' rights are maintained, the better off consumers will be."

But Republicans say the health care law still amounts to a power grab by Washington. "Once again, the Obama administration has overpromised, oversold and under-delivered," said Bob McDonnell, Virginia's GOP governor.

The Supreme Court is scheduled to hear arguments on the law's constitutionality in two weeks, but this dispute may continue even after the justices have ruled.

Starting Jan. 1, 2014, the new exchanges must be up and running in every state, the linchpin of a plan to make health insurance accessible and affordable to those who now struggle to find and keep coverage. Individual consumers and small businesses will be able to shop online for competitively priced coverage, and many will receive government subsidies to help pay premiums.

Experts say it's anybody's guess how the national rollout will go. If a state is not ready, the law requires the federal government to step in to run its exchange. But the Obama administration's request for $800 million to operate federal exchanges has gotten a frosty reception from congressional Republicans.

"At this point it's still an open question as to whether all the states will open up as of 1-1-2014," said Neil Trautwein of the National Retail Federation, a business group whose members will be heavily affected by the law.

The new markets are for individuals and small businesses. Most people who now have employer health insurance will not have to make changes. It's a design that works well in Massachusetts, where an exchange has been in place for several years.

Massachusetts achieved political consensus about its health care overhaul under former GOP Gov. Mitt Romney, who is now seeking his party's presidential nomination. That's far different from the enduring national divisions over President Barack Obama's law, even though it used Romney's as a foundation.

Setting up 50 state exchanges wouldn't be easy even if the federal overhaul enjoyed widespread support.

For things to go smoothly, state and federal officials must work together to verify private personal and financial details for millions of people, make sure consumers are enrolled in the right health plan, and accurately calculate how much government aid, if any, each household is entitled to receive.

And with customer service the goal, consumers need to get answers in hours, not weeks.

Nearly 30 million people, about half of whom are currently uninsured, are eventually expected to get private health coverage through exchanges.

Another group of uninsured people — as many as 16 million low-income Americans expected to qualify for Medicaid — could also enter the system through their exchanges.

But states are moving in fits and starts. Only 13 states and Washington, D.C., have adopted a plan for exchanges. Progress varies widely among others, and many are waiting for the Supreme Court.

Under the law, most Americans will have a legal responsibility to carry health insurance, either through their job, a government program or by buying their own. Millions will receive financial assistance for their premiums.

Whether that amounts to an unconstitutional expansion of federal power is among the subjects of a showdown that begins March 26, when the Supreme Court is set to begin three days of arguments. A decision is expected by June.

Health and Human Services Secretary Kathleen Sebelius says she expects the court to uphold Obama's Affordable Care Act and thinks states will move quickly once the court has ruled.

States have until Jan. 1, 2013, to obtain federal approval for their exchanges. Among the rule's key elements:

— States can receive conditional federal approval for their exchanges if their plans are far along but not final by Jan. 1, 2013. States can operate exchanges in partnership with other states. The federal government will provide funding for different types of exchanges to allow for flexibility.

— The state exchanges themselves will determine the number and type of health plans offered to consumers, within broad standards set by the federal government. Plans will have to comply with marketing rules to ensure they are not trying to cherry-pick the healthiest customers in the state.

— Consumers must be able to apply online for coverage in their state exchanges. To reduce paperwork, exchanges will rely on existing computer databases to verify basic personal information and eligibility. However, some key details, such as whether the consumer is a legal resident of the U.S., may have to be verified by the government. And the IRS will have final say on tax credits.

— Exchanges must be able to pick from two federally approved methods for coordinating with the Medicaid program in their states.

— Exchanges must be able to use intermediaries called "navigators" to help educate consumers and small businesses about how the new system works.

— Exchanges must be financially self-sufficient by 2015, by charging fees to support their operations.