Injecting a rare shot of bipartisanship in the nation’s contentious health care overhaul, the Obama administration Jan. 3 cleared four Republican-led states to build their own consumer-friendly insurance markets.
With open enrollment for millions of uninsured Americans just nine months away — Oct. 1, 2013 — the four GOP-led states became part of a group totaling 17 states plus Washington, D.C., that have gotten an initial go-ahead to build and run insurance exchanges. Seven were approved Jan. 3.
Significantly, the list also included California, which has nearly 7.5 million uninsured residents, more than any other state. Democratic-led California was an early supporter of President Barack Obama’s health care law and had been working diligently on its plan.
Insurance exchanges are not something consumers are familiar with.
“Most people don’t really know what those words mean, but that’s OK,” said Rachel Klein, executive director of Enroll America, a nonprofit trying to educate the public about new benefits under the federal health care law. “What they really need to know is that there’s going to be a new way to buy health insurance.”
The new marketplaces are supposed to take the confusion and anxiety out of buying private health insurance for individuals and families who buy their coverage directly. Exchanges are meant to have the feel of an online travel site, an Expedia or Orbitz.
Exchanges will also offer some relief from sticker shock. Under the new law, about 8 in 10 customers in the new marketplaces will be eligible for income-based federal aid to help pay their premiums.
Small businesses will have separate access to their own exchanges.
The approvals announced Jan. 3 are provisional; administration officials said more work remains to be done before they’ll issue final sign-offs.
The GOP-led states conditionally approved are Idaho, Nevada, New Mexico, and Utah. Idaho and Utah have Republican governors and legislatures. Nevada and New Mexico have GOP governors, but Democrats control their legislatures.
“We’re on track for Idaho having a say over how this process works, instead of having the federal government dictate all of it,” said Jon Hanian, spokesman for Republican Gov. C.L. “Butch” Otter. The Legislature still has to weigh in.
A fifth Republican-led state, Mississippi, may yet win approval. However, the administration’s decision is complicated by a legal dispute between Republican state officials. The governor does not want to participate, while the insurance commissioner does.
The federal government will set up and run the new marketplaces in states that opt out of playing any role, and 19 Republican-led states have taken that route.
The rest of the states are either pursuing partnerships with Washington or still mulling their options.
Two states, Arkansas and Delaware, have been approved for partnerships. That means a state will handle consumer issues and oversee health plans while Washington takes on the back-office tasks of enrolling consumers and determining subsidies.
Right now, exchanges exist in only a couple of states, although some large private employers are also experimenting with them.
Originally a Republican idea, exchanges then won bipartisan support, only to be abandoned by many in the GOP once they were incorporated into Obama’s health care law.
The basic concept is that setting up a marketplace with clear-cut rules would benefit consumers and encourage insurance companies to compete, helping keep costs in check. Former Massachusetts Gov. Mitt Romney set up an exchange in that state under his 2006 health care overhaul law. And Utah has already launched one that caters to small businesses.
Under Obama’s law, plans in the new marketplaces will have to cover a set of “essential” benefits, including hospitalization, doctor visits, prescriptions, prevention and care for pregnant women and young children. Cost to the consumer will be the main difference among plans, with four levels of coverage: bronze, silver, gold, and platinum. A consumer with a bronze plan will pay lower monthly premiums, but would face higher cost sharing for medical care.
Exchanges will also steer low-income people to state Medicaid programs. The law gives states the option to expand Medicaid to cover more of their low-income residents, with the federal government picking up about 90 cents of every dollar in added costs.
Coverage through exchange plans will begin on Jan. 1, 2014.
At the same time, the law will require most Americans to carry health insurance, either through an employer, a government program, or by buying their own policies. Insurance companies will be barred from turning away the sick or charging them more. And insurers will also be limited in what they can charge older customers.