Obamacare’s insurance exchanges
Posted: Wednesday, December 12, 2012 7:00 pm
The next act in the Obamacare saga is about to begin – and it’s going to be tragic. Friday marks the deadline for states to reveal their plans for constructing insurance exchanges in line with the healthcare law’s dictates.
Many are opting out – leaving the federal government to set up exchanges for them. Others simply aren’t ready to establish their own.
And so these central components of Obamacare will soon stand as the latest examples of the president’s failure to make health insurance more accessible or affordable.
Obamacare’s insurance exchanges were intended to be state-based marketplaces where individuals and small businesses could choose from an array of coverage options. In theory, this structure would encourage states to experiment – and to tailor their offerings to the unique needs of their populations.
But in reality, the exchanges are burdened with so many rules that experimentation and competition have been stifled. Given the cost of setting up an exchange – and of complying with all the federal regulations – it’s no surprise that many states are refusing to participate.
According to a new report from PricewaterhouseCoopers, just 13 states and the District of Columbia have formally declared their intention to set up exchanges. Eight have said that they will not do so.
Many states planning to build exchanges will not be ready for enrollment by October 2013, when Obamacare requires them to be.
The reasons are manifold. For one, states are struggling with the design and implementation of the complex technology systems needed to run exchanges – especially in less than a year. California, the first state to move forward with an exchange, didn’t even lock down a vendor to do its IT work until May 2012.
States are also facing difficulty meeting Obamacare’s regulatory deadlines. Most have had trouble figuring out, for example, which “essential health benefits” must be included in insurance plans sold through their exchanges. The federal government did not decide until late 2011 that states would have to take on this responsibility. As a result, only 20 states met this year’s September 30 deadline for submitting their vision of essential benefits to federal regulators.
And even if states are able to come up with essential benefits rules, they may be unable to attract any insurers onto their exchanges. Many insurance firms have stated that they may not be able to economically sell health plans through the exchanges if the required essential benefits are too generous.
President Obama need only look out his window to see how the insurance exchange drama is playing out. In the District of Columbia, small businesses are openly revolting over the city council’s requirement that all employers with fewer than 50 workers purchase their health plans through the District’s government-run exchange. The city has effectively eliminated the private small-group insurance market.
D.C. businesses see the folly in forcing a one-size-fits-all solution on their employees. The government-certified plans will have to cover all sorts of additional healthcare services that beneficiaries may not want – and will therefore cost more.
And then there’s the issue of money. Nobody knows for sure how much the exchanges will cost.
Several states have received federal grants to construct their exchanges. But once that money runs out, states will be on their own.
Minnesota, for instance, projects that it will have to come up with as much as $40 million in 2015 to run its exchange.
The Supreme Court’s decision this summer to allow states to opt out of Obamacare’s prescribed Medicaid expansion makes things even more complicated.
Several states have said that they won’t increase Medicaid enrollment. Residents who thought they’d sign up for Medicaid may instead turn to the exchanges. But coverage delivered through the new marketplaces will end up costing the federal government 50 percent more than it would have through Medicaid.
So the exchanges could grow far more expensive than initially thought – and quickly.
It’s safe to say that a federal mandate flouted by half the states doesn’t enjoy widespread support. That’s exactly the case with Obamacare’s health insurance exchanges – and it’s indicative of the broader failure of the president’s healthcare law.
Sally C. Pipes is president, CEO and Taube Fellow in Health Care Studies at the Pacific Research Institute.
Published in The WCP 12.11.12