Pa. to create state-run insurance exchange
After months of study, the Corbett administration said Tuesday that it was moving forward with a key - and widely supported - option offered by the federal health-care overhaul: a state-run insurance exchange.
Exchanges have gained neither the high-profile status nor the derision aimed at other parts of President Obama's program. But they are expected to transform the arduous process of buying health insurance for millions of people who get coverage individually or are covered by small businesses.
"It is akin to an Expedia-type function, where you go and you are looking for a particular trip and a hotel, and you can look at the different options and what you want to buy - and then you can make your choice and buy accordingly," said Pamela Clarke, a vice president of the Delaware Valley Healthcare Council, an industry group. People without Internet access will also be able to take advantage of the exchange.
Besides being a one-stop shop for health insurance, the exchange will be the only place where many of the people who will be newly eligible for insurance under the law - those making between 133 percent and 400 percent of the poverty level - can apply for the tax credits that are intended to make coverage affordable.
The exchanges are scheduled to start in January 2014. A report commissioned by the Pennsylvania Insurance Department estimated that at least two million people would participate.
The existence of an exchange was never in doubt. The congressional overhaul known as the Patient Protection and Affordable Care Act gives states a choice between a federal- or state-run exchange. Both Republicans and Democrats tend to support the concept, although some blue states have moved forward quickly, and some red states have held back, largely so that they do not appear to be supporting the overall health law.
Corbett, who as attorney general joined 25 other states in a lawsuit seeking to overturn the individual mandate that is a key provision of the overhaul, appears to be taking a pragmatic approach.
"While the governor believes that the law requiring the purchase of health insurance is unconstitutional, we must be prepared if the Supreme Court does not strike down the law," said Rosanne Placey, state Insurance Department spokeswoman. Plus, she said, "the governor recognizes that doing nothing would result in a federally run exchange, which is not the best option for Pennsylvania."
New Jersey, where Gov. Christie also opposes the health-care overhaul, but has not joined any of the lawsuits seeking to overturn it, is somewhat further along in the complex planning process for its own exchange.
The next step is for Pennsylvania to apply by Dec. 30 for a multimillion-dollar grant to plan how the exchange would work.
Franca D'Agostino, who is overseeing the process for the Insurance Department, said officials were surprised at the nearly unanimous support for a state-controlled plan among insurers, consumer advocates, medical providers, and others.
But controversy is likely to erupt in the General Assembly, where legislation is needed to define the powers and structure of the exchange.
A key issue will be whether the exchange has the authority to negotiate rates or whether insurance companies and providers will continue in the current free-market approach. Industry tends to favor the latter, consumer advocates the former.
Another big question is whether the exchange will be part of state government, a quasi-independent agency, or a separate nonprofit organization - and who will sit on the governing board.
The exchange will be open to individual purchasers of all incomes, including those on Medicaid, and small-group purchasers such as small businesses. The legislature must decide on some of the parameters, such as whether the exchange will be open to employers with 50 workers, or as many as 100. Small businesses are projected to save money because of the power of numbers in the exchange.
The federal law gives states the option of adding larger groups in 2017.
Cheers greeted the news Tuesday of Pennsylvania's decision.
"It is a door that is really going to open for the one million uninsured Pennsylvanians to get high-quality, affordable health coverage," said Antoinette Kraus, project director for Pennsylvania Health Access Network, an advocacy group.
Independence Blue Cross vice president Scott Post, who testified at one of the Insurance Department's stakeholder hearings, e-mailed that the company "enthusiastically" supports the decision. "We think Pennsylvania is best suited to design an exchange that best serves its residents," he said.
Joel Ario, a former Pennsylvania insurance commissioner, who spent the last year directing the federal health-exchange office, said: "It was always my goal to get as many states as possible to develop their own exchanges, because these insurance markets are different, state by state. I'm glad my home state has gotten on the bandwagon."
Under the federal health-care law, each state is supposed to set up an exchange or else opt into the federal version. States may also create multistate exchanges or may limit an exchange to a region within a state.
"There are innumerable technical challenges and a lot of deadline pressure," said professor Joel Cantor, director of the center for state health policy at Rutgers University in New Jersey. "It will require significant changes in . . . state agencies, insurance companies, and the Medicaid program. And setting up the Web portal is not a simple matter."
As of July, more than a third of states were taking steps - such as passing necessary legislation - to create exchanges, according to the Kaiser Family Foundation.
Casting a shadow over the whole process is a lawsuit challenging the constitutionality of the affordable-health-care law. Earlier this month, the Supreme Court agreed to hear a challenge to the law brought by the attorneys general from 26 states, including Pennsylvania.
The most controversial and contested provision of the law requires all citizens to buy health coverage or pay an annual penalty for remaining uninsured.
If the court interprets the penalty as a tax, it could even postpone a decision until 2015, because federal law says a tax cannot be challenged until it is imposed.
Said Cantor: "We could be in limbo until then."