PA moves forward with health-care exchange despite unknowns
Legislation should be passed by June
By Eric Boehm | PA Independent
HARRISBURG — Pennsylvania is moving forward with the development and implementation of a state-run health insurance exchange system, but plenty of questions remain.
The state is required to set up an exchange by 2013 for people and businesses to buy health insurance as part of the federal Patient Protection and Affordable Care Act of 2010.
While the future of the law itself remains in question, the state has decided to work on establishing its exchange, rather than having the federal government step in.
“We’re now taking those initial baby steps, working with the General Assembly and figuring out what a state-based exchange would look like,” said Michael Consedine, commissioner of the state Insurance Department, which will oversee the exchange. “We have to figure out, as part of this exchange model, how to fund the exchange going forward.”
The department and lawmakers are aiming for a June deadline to pass the enabling legislation, which would keep the exchange on schedule to debut in early 2013, after gaining federal approval.
The enabling legislation also will address how to fund the exchange after a $33 million start-up grant from the federal government runs out.
But the major question sits with the U.S. Supreme Court, which is expected to rule on the constitutionality of the federal Patient Protection and Affordable Care Act later this year.
“We should have that judicial guidance within the next six to nine months,” Consedine said. “We don’t expect to have gone that far down the road in terms of having a full functioning exchange in the next six months.”
And if the court rules the law unconstitutional, it would be a “complete reset,” Consedine said.
To protect the state from future costs, Consedine said any legislation that is introduced should have a sunset clause that would repeal the law if the Supreme Court rules the federal law unconstitutional.
With the exceptions of Massachusetts and Utah, state-run health exchanges are new entities that will function as marketplaces for health insurance. Residents who do not have health insurance coverage through their jobs will be required to buy insurance under the federal law or face penalties.
Ideally, the exchanges will operate like online travel sites by allowing consumers to compare and shop for insurance while leveraging the power of mass purchasing to keep costs low, Consedine said.
Based on various studies, the Insurance Department is estimating between 2 million and 2.2 million Pennsylvanians will use the exchange when it becomes operational in 2014, although it admits the exact number is difficult to determine.
An estimated 1.5 million Pennsylvanians are without health insurance.
According to the draft plan for the implementation of the health insurance exchange, Pennsylvania could use multiple exchanges operated by private contractors and overseen by the state. Some could be directed at providing insurance to individuals, and others could provide insurance to small businesses.
That approach has drawn its share of opponents, including the Pennsylvania Health Access Network, a coalition of organizations working to improve access to affordable health care in the state.
Erin Gill-Ninehouser, an education and outreach coordinator for the group, said the state’s decision to use multiple providers to run the exchange will not ease the confusion and frustration faced by people who want to buy health insurance.
“The whole point of an exchange is to make it easier for people who do not have insurance to get coverage,” she said. “It would be an enormous waste of time and resources to create a system that is no better than our current one.”
The state also would risk losing the power of mass purchasing with that approach, she said.
In a letter to the federal Department of Health and Human Services in December, Gov. Tom Corbett indicated his support for an exchange that “promotes the free market, fosters competition and retains ample choice of health insurance options for all Pennsylvania consumers.”
As attorney general, Corbett in January 2010 signed onto the lawsuit challenging the constitutionality of the individual mandate contained in the federal health-care law. He was running for governor at the time.
During his time as governor, Corbett has said it makes sense for the state to move toward establishing the exchange while waiting for the case to move through the courts.
Corbett’s letter was part of the state’s application for a $33 million grant from the federal government to begin implementing the exchange.
After 2014, the exchange is expected to be self-sufficient. How it will be paid for will be addressed by the enabling legislation, which the General Assembly must pass before the exchange can go online.
Other states further along in the process than Pennsylvania have imposed an assessment on health insurers to cover the ongoing costs of the exchange.
In Illinois, a state roughly the size and population of Pennsylvania, the average annual cost to providers is expected to approach $90 million to cover an estimated 1 million users.
So far, no legislation to implement the health-care exchanges has been introduced in the General Assembly, although hearings have been held on the issue.
The state Insurance Department would receive $123 million in state taxpayer funds in the budget proposed by Corbett last week, about a 2 percent boost from last year.
The increase is the result of an additional $4 million being directed to the Children’s Health Insurance Program, which provides coverage for 195,500 children in the state.