Health exchanges’ futures remain in doubt despite new grants

States have until Nov. 16 to file proposals with the federal government on how they will proceed with their insurance marketplaces.

By — Posted May 28, 2012

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Physicians and other observers appear confident that most states that plan to start health insurance exchanges will meet a fall deadline to submit proposals to HHS. But even as the federal government continues to supply grant money and guidance to states to establish these marketplaces, questions linger in the physician community about their long-term sustainability.

On May 16, the Dept. of Health and Human Services granted new federal funds totaling more than $181 million to six states — Illinois, Nevada, Oregon, South Dakota, Tennessee and Washington — that plan to build state-run exchanges under the national health system reform law. The latest round of awards brings the total amount of exchange-related grants to states during the past two years to more than $1 billion.

American Medical Association President Peter W. Carmel, MD, commended HHS for assisting states with “the important work of establishing and implementing health insurance exchanges.”

The newest establishment grants were announced in tandem with a series of guidance documents that outline what the exchanges should look like, how they’ll work, and what information states will need to submit with their proposals for their exchanges. States have until Nov. 16 to file exchange blueprints with HHS, Steve Larsen, deputy administrator of the Centers for Medicare & Medicaid Services and director of the CMS Center for Consumer Information and Insurance Oversight, said during a May 16 conference call.

The proposals will function as a conditional approval mechanism, an acknowledgment that “a lot of states will be on a state-based exchange path but won’t be certified as ready to launch in every functional area,” said Patti Boozang, managing director at Manatt Health Solutions, a national policy and strategic business advisory group. Given the level of activity in states to plan for these exchanges, Boozang said many of them are expected to submit proposals in November.

B.W. Ruffner, MD, an oncologist in Chattanooga, Tenn., said his state should be in a position to make the deadline.

The state’s Dept. of Finance and Administration “has demonstrated a well-organized command of the issues to date,” said Dr. Ruffner, who has been involved in the development of the exchange in Tennessee.

The new insurance marketplaces are slated to become operational on Jan. 1, 2014. During the conference call, Richard K. Onizuka, PhD, CEO of the Washington State Health Benefit Exchange, said the new grant money would enable his state to have its exchange “open for business in October 2013 and open for coverage in January 2014.”

Future financing problems

Washington state “is all in favor of increasing the number of insured,” said Douglas Myers, MD, president of the Washington State Medical Assn. But as long as the federal government and the state continue to run very high budget deficits, the concern is that these implementation funds for the exchanges “are just a drop in the bucket,” he said. “We’re still going to have to fund the health care that’s going to be set up through the exchange.”

Financing also is a long-term concern for the exchange’s sustainability in Illinois, said William Werner, MD, president of the Illinois State Medical Society.

“The funding for insurance exchanges initially is being supported by the federal government. But going forward, can a state like Illinois, which is already broke, & assume the costs of the insurance exchange?” Dr. Werner asked, noting that his state’s governor was considering a proposed $2 billion cut to Medicaid.

Kimberly Parker, a spokeswoman for the Illinois Dept. of Insurance, said the state will “continue laying the groundwork for its exchange” with the new grant money it received. But Illinois has no legislation to establish such an exchange, Dr. Werner said.

Though many states have applied for and received federal funding to develop exchanges, not all have indicated that they actually will do so. The uncertainties surrounding the reform law’s future before the U.S. Supreme Court “has some states really hesitating to commit to this,” Dr. Werner said.

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States get more than $181 million in HIE grants

Six states on May 16 received federal grants to help build health insurance exchanges before 2014. Washington state was awarded a level 2 grant for being further along in developing its exchange.

State Award
Illinois $32.79 million
Nevada $4.40 million
Oregon $6.68 million
South Dakota $5.88 million
Tennessee $4.30 million
Washington $127.85 million

Source: “Creating a New Competitive Marketplace: Affordable Insurance Exchanges,” Dept. of Health and Human Services (link)

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External links

“Creating a New Competitive Marketplace: Affordable Insurance Exchanges,” Dept. of Health and Human Services (link)

“Draft Blueprint for Approval of Affordable State-based and State Partnership Insurance Exchanges,” Centers for Medicare & Medicaid Services, May 16 (link)

“General Guidance on Federally-facilitated Exchanges,” CMS, May 16 (link)

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