HHS Issues Guidance for State Healthcare Exchanges

The Department of Health and Human Services (HHS) has proposed a structure for health insurance exchanges that gives states significant flexibility in how and when they set up open marketplaces designed to boost competition.  HHS announced a sliding deadline for states to create the exchanges, allowing them to receive conditional approval if they are in advanced preparation by 2013.

Additionally, states that are not ready by the final 2014 deadline can delay opening the exchanges until 2015 or later.  States that are still deciding whether to establish health insurance exchanges have sought clarity on how these insurance marketplaces will function.  The federal government previously had provided few details on this key part of the Patient Protection and Affordable Care Act (ACA).

The rationale for the exchanges is to create convenient access to an open marketplace of insurance plans that lets uninsured people and small businesses join together to negotiate affordable rates.  States had faced a January 1, 2013, deadline to decide if they would participate in the program.  Those opting to participate are expected to create governance and information technology structures virtually from scratch to have the exchanges in full operation by 2014.

“If we don’t have significant progress made by the end of the year, the IT experts tell us it’s going to be really hard to meet the deadline,” Kansas Insurance Commissioner Sandy Praeger said.  She is working to establish an exchange despite a lack of legislation in her state to move forward with it, not to mention a conservative governor who strongly opposes the health law.  “The health insurance market is often broken, especially for small businesses,” said HHS Secretary Kathleen Sebelius.  Sebelius said the exchanges would share three key features: They will serve as one-stop shops for comprehensive insurance needs; create competition between insurers based on price and quality; and provide basic coverage to all Americans.  “This is how members of Congress get their health insurance today,” she said.  “And once these reforms are fully in place, buying insurance will become much more like buying a home appliance or an airline ticket.”

Meanwhile, HHS announced three new initiatives to help states improve the quality and cut the cost of care for “dual eligible” – the approximately nine million Americans who qualify for both Medicare and Medicaid.  The programs include a demonstration program to try out two new financial models to better coordinate care for people who are eligible for both government programs; a demonstration program to help states upgrade the quality of care for people in nursing homes that focuses on cutting hospitalizations; and setting up a technical resource center to help states improve care for high-need high-cost beneficiaries.  “By improving care to the most vulnerable of our citizens, we can improve the quality of their lives and prevent wasteful spending,” Sebelius said.  “Governors and their staff have been looking for tools to help them accomplish these important goals.  I am pleased that we can continue our strong partnership with the states to do this.”

These moves couldn’t come at a better time.  It is estimated that the growth in the uninsured adult population continued in 2010 — particularly among the number of long-term uninsured and poorer uninsured.  Americans of all ages who were uninsured during the last year reached 60.3 million in 2010, an increase of nearly two million when compared with 2009, according to a report by the National Center for Health Statistics, a division of the Centers for Disease Control and Prevention.

Private health coverage continued to decline while public coverage increased, especially for children.  Among non-elderly adults, 61.1 percent had private coverage in 2010, a 1.7 percent decline.  The rate of privately insured children fell 1.9 percent to 53.8 percent.  While greater numbers of adults became uninsured, fewer children on the whole lost coverage.  That’s largely because the percentage of kids with public coverage — Medicaid and the Children’s Health Insurance Program (CHIP) — increased to 39.8 percent, up nearly two percent.  “Medicaid and CHIP have been a real success story,” said Tom Buchmueller, PhD, a University of Michigan health economist.  State expansion of children’s health programs began increasing the percentage of publicly covered children beginning in 2008.

Sebelius was joined by Washington State Governor Christine Gregoire,  who said the 135,000 dual eligible residents of her state cost $1 billion annually in healthcare costs.  Though they represent only 12 percent of the Medicaid caseload, they total more than one-third of the spending, she said.  “If we could just reduce the cost of two percent a year by investing in community-based solutions rather than nursing homes, which is what our patients want anyway, by helping them avoid psychiatric hospitalizations, we believe we could save at least $10 million a year just with that small segment – that high-risk segment of our dual eligible population.  This is our costliest population, with the greatest need, yet we’re not able to focus on what’s right for them,” Gregoire said.  “The opportunities you’ve provided us will make this possible now.”

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