Partnerships OK'd to ease insurance exchange burdens

Delaware and Arkansas are the first states to receive conditional approval to operate state-federal partnership exchanges. HHS hopes more follow suit.

By — Posted Jan. 14, 2013

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States that have decided to partner with the federal government in running new insurance marketplaces in 2014 say they seek to maintain some autonomy while limiting state operational costs, but many details on governance, insurance regulation and the role of physicians need to be worked out.

At this article's deadline, the Dept. of Health and Human Services had given 19 states and the District of Columbia conditional approval to develop new insurance exchange models under the Affordable Care Act, through which consumers will shop for coverage options in 2014. Although most of these states will operate their own exchanges, Delaware and Arkansas were the first to receive clearance on partnership exchanges, in which responsibilities will be split between the states and the federal government.

Undecided states have until Feb. 15 to announce intentions to pursue partnership exchanges, after which the federal government will move to establish its own exchange in any state that has not committed to the state-run or partnership model.

Delaware and Arkansas officials described the partnership route as a “win-win” in that they get to assume traditional state roles of insurance plan management and consumer education, while gaining structural and financial support from the federal government. HHS sees the approach as a pathway for states eventually to take on full responsibility for running their exchanges, said Gary Cohen, deputy administrator of the Centers for Medicare & Medicaid Services and director of the agency's Center for Consumer Information and Insurance Oversight, during a Jan. 3 teleconference.

But at least in Delaware, a state that chose a partnership exchange due to cost concerns and its small population, that scenario remains unlikely. “At this point, I cannot envision us going to a state-based-only exchange,” said Rita Landgraf, Cabinet secretary of the Delaware Dept. of Health and Social Services.

The state anticipates covering 35,000 people through the exchange. Delaware someday might look at some type of regional exchange under which it partners with another larger state with similar regulatory authority to increase the insurance pool, she said.

Advantages for states

The upside of a partnership model is that the federal government assumes all of the administrative tasks of an exchange. These include functions associated with eligibility determinations, enrollment and member management, as well as health information technology needs, such as setting up a Web-based portal for the exchange, said Steve Groff, acting director of the Delaware health department's Division of Medicaid and Medical Assistance.

Had it adopted a state-based exchange, Delaware would have faced the expensive proposition of taking on these functions by itself and may have had to pass on some of the costs to plans and consumers, he said.

Under a partnership exchange, the state retains its traditional insurance regulatory authority, such as establishing requirements for qualified plans, and stays in charge of consumer assistance activities. As another perk, it gets paid by the federal government for taking on such responsibilities. Delaware also requested $8.5 million to support preparations for open enrollment beginning in October and full exchange implementation by January 2014.

Other key details about the exchange's governance have yet to be worked out. The Delaware Health Care Commission, part of the health department, is the agency handling decisions related to the exchange, Landgraf said. “I believe that once this exchange becomes operational, we may be addressing whether we should establish a governance board specifically for the exchange.” But as of now, the health care commission does not have that authority under statute, she said.

In the event any governing boards or working groups are established, physicians should have a seat at the table to protect patient interests, said Stephen J. Kushner, DO, president of the Medical Society of Delaware.

Under a partnership exchange, states retain traditional insurance regulatory authority.

“We'd certainly provide valuable input on quality improvement strategies and things like that. It's critical that we develop sound policies and responsible standards” for exchange health plans, he said.

Landgraf said she and other state health officials meet regularly with the medical society to discuss the exchange process and other provisions of the health system reform law.

Health insurance exchanges will do much to move the concept of the primary care, patient-centered medical home model forward, “and I think it's a great idea,” Dr. Kushner said. He said the federal government appears flexible on partnership exchanges, but “roles and responsibilities are still being defined.”

Why Arkansas rejected state-based model

In Arkansas, state politics factored heavily into the state's exchange decision, said Cindy Crone, director of the health insurance exchange partnership division at the Arkansas Insurance Dept. The states' lawmakers did not approve legislation enabling a state-run exchange, but neither did the state want to cede all control to the federal government.

The hybrid state-federal partnership exchange “looked to us like a good opportunity to have more state control in plan management” and other traditional state insurance functions, Crone said.

The Arkansas exchange plans to cover 211,000 people in its first year of operation. Lonnie Robinson, MD, president of the Arkansas Academy of Family Physicians, speaking as an individual, said he backed any measure that would increase health care access to patients. Arkansas is a rural state with many safety-net hospitals whose uncompensated costs are extremely high. “If we can increase coverage through the exchange, we can increase the value of our small rural hospitals,” he said.

The insurance commissioner has been meeting with groups of physicians and others to seek input on the exchange's benefits and other provisions. What doctors are concerned about “is making sure that the on-exchange and off-exchange marketplaces are structured so that people understand the differences between the two markets and that they're not radically different,” said Cal Kellogg, PhD, senior vice president and chief strategy officer of Arkansas Blue Cross and Blue Shield.

Insurers in Arkansas also have exchange questions. As the largest payer in the state, the Arkansas Blues plan to offer individual and small-group products on the exchange, but final federal rules have yet to be issued determining plans' actuarial values and minimum benefits. “Until we have more specifics, we can't design our products,” Kellogg said.

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Who does what in partnership insurance exchanges?

The Dept. of Health and Human Services is encouraging states to develop health insurance exchanges under a state-federal partnership model — with the thought that those states eventually could pursue exchanges run without federal assistance. Certain partnership exchange responsibilities will be split between state and federal officials.

State responsibilities will include:

  • Activities related to the management of qualified health plans and consumer outreach.
  • Recommendations on how local market factors should guide exchange standards.

Federal responsibilities will include:

  • All minimum exchange functions not under the jurisdiction of the states, such as plan enrollment as well as the establishment and maintenance of exchange websites and call centers.
  • Risk adjustment for insurance plans in the exchange.
  • Overall operations of the exchange.

Source: Guidance on the State Partnership Exchange, Centers for Medicare and Medicaid Services' Center for Consumer Information and Insurance Oversight, Jan. 3 (link)

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