Cash flowing to states to implement health insurance exchanges, but how will they control costs? Ability of state health insurance exchanges to “drive costs down” seems rather optimistic

There coming, barely two years away and counting; that’s state health insurance exchanges by the way.

Federal money continues to flow to the various states to help them establish their exchanges. Initially the exchanges will be primarily for individuals and small businesses, but over time employers are expected to shift workers into the exchanges simply because there are financial incentives for employers and many workers to obtain health insurance through an exchange. Only time will tell.

What is interesting is that policy makers and bureaucrats still believe that the exchanges will somehow create new competition among insurers that will restrain costs. That is an interesting assumption since insurers already compete with one another with no positive effect on costs and by adding more insurers into a market their individual leverage to negotiate with health care providers is reduced. In addition, all insurers will be subject to the same mandates and minimum benefit packages. There will be little room to maneuver. We seem to keep missing the point that premiums are not the issue, underlying costs of health care are. Federal officials should articulate exactly what they expect insurers to do to hold down health care costs so we all have that information.

After you read the optimistic view of the world from the bureaucratic point of view in the following press release, read this:  Study: Employers Could Dump Sickest Employees On Public Health Care

News Release   FOR IMMEDIATE RELEASE   November 29, 2011
Contact: HHS Press Office
States receive more flexibility, resources to implement Affordable Insurance Exchanges.  More than half of states now creating marketplaces to help millions of families and small businesses buy insurance

The Department of Health and Human Services (HHS) today awarded nearly $220 million in Affordable Insurance Exchange grants to 13 states to help them create Exchanges, giving these states more flexibility and resources to implement the .  The health care reform law gives states the freedom to design Affordable Insurance Exchanges – one-stop marketplaces where consumers can choose a private health insurance plan that fits their health needs and have the same kinds of insurance choices as members of Congress.

The Department also released several Frequently Asked Questions providing answers to key questions states need to know as they work to set up these new marketplaces. Critical among these are that states that run Exchanges have more options than originally proposed when it comes to determining eligibility for tax credits and Medicaid.  And states have more time to apply for “Level One” Exchange grants.

Today’s awards bring to 29 the number of states that are making significant progress in creating Affordable Insurance Exchanges.  States receiving funding today include: Alabama, Arizona, Delaware, Hawaii, Idaho, Iowa, Maine, Michigan, Nebraska, New Mexico, Rhode Island, Tennessee, and Vermont.

“We are committed to giving states the flexibility to implement the Affordable Care Act in the way that works for them,” HHS Secretary Kathleen Sebelius said.  “Exchanges will give consumers more choices and make it easy to compare and shop for insurance plans.”

In the new Exchanges, insurers will provide new information such as an easy-to-understand summary of benefits and costs to consumers. The level of detail will sharpen competition between carriers which will drive costs down.  “OMG,” rdq

HHS also released today a set of Frequently Asked Questions (FAQs) in anticipation of state legislative sessions beginning in January. Answers will help advance state policy development for Exchanges.  For example, they clarify that Exchange grants can be used to build a state Exchange that is operational after 2014; that state-based Exchanges will not be charged for accessing Federal data needed to run Exchanges in 2014; and that state insurance rules and operations will continue even if the Federal government is facilitating an Exchange in the state.  HHS will also allow greater flexibility in eligibility determinations, allowing, for example, a state-based Exchange to permit the Federal government to determine eligibility for premium tax credits.

Of the 13 states awarded grants today, 12 are receiving Level One grants, which provide one year of funding to states that have already made progress using their Exchange planning grant.  The 13th state, Rhode Island, is receiving the first Level Two grant, which provides multi-year funding to states further along in the planning process.
Forty-nine states and the District of Columbia have already received planning grants, and 45 states have consulted with consumer advocates and insurance companies.  Thirteen states have passed legislation to create an Exchange.

Related articles

• Health insurance exchanges’ iffy status (politico.com)
• HHS Confirms It Will Establish A Federal Exchange (thinkprogress.org)

Tags: Affordable Care Act, Health insurance exchange, health insurance exchanges, United States Department of Health and Human Services, United States Secretary of Health and Human Services, will employers force employees to exchanges