The Affordable Care Act (ACA), aka Obamacare, is in the third year of implementation and it is approaching crunch time for state governments. This year, one of the biggest challenges looming over 50 capital cities will be what to do about health insurance exchanges. A health insurance exchange is like an online shopping mall where individuals and small businesses are supposed to be able to purchase coverage. I say supposed to because there is a lot of politicking and waiting behind the scenes. An even bigger problem will soon be realized when state policymakers all over the country finally comprehend the fact that exchanges are complex and expensive to set up.
You will be hearing more about this concept in the upcoming months, but real quickly let me explain why exchanges are so important. In a nutshell, they are designed to offer individuals and small businesses the ability to compare health insurance plans, purchase policies, and to qualify for subsidies or Medicaid. This makes them a critical piece of the access puzzle. The ACA law sought to solve the access problem by providing insurance coverage through an expansion of the Medicaid program or subsidies to individuals to purchase coverage.
Exchanges are to be offered locally because each state regulates their respective insurance market differently. Federal grant money is available for every state and can be obtained in grant form, but the deadline is June 29, 2012. If states miss the deadline, they are faced with two choices—paying for it on their own or ceding control to the federal government which is a controversial topic in its own right.
Meanwhile, back at the ranch, the Obama administration is in the midst of a legal challenge brought by 26 states opposing the individual mandate which requires all individuals to carry health insurance or face a penalty. The Supreme Court is scheduled to address this lawsuit in March. Many state legislatures have adopted a “wait and see” approach until after the court rules, which is a gamble with poor odds in my view.
Here is why. If the individual mandate is upheld, states will have only weeks to create their insurance exchanges if they wish to receive funding from the federal government. If the exchanges are in place and the individual mandate is declared unconstitutional, the states have a new bureaucracy with nothing to do. Nobody knows what new regulations will be in place or the cost to establish a new state agency. This is even more troubling considering the fact that many states are facing budget problems in this recession.
The Tortoise and the Hare appears appropriate when looking at implementation of the ACA at the state level. Some state legislatures have already set up exchanges and are in the process of being funded. Others have adopted the “wait and see” approach. The race is on, and the guys holding the tape at the finish line (Congress) can’t decide where to stand. The official in charge (the Administration) keeps changing the rules, and we, the people, will not know who the winner is until the very end.
Some light reading on the subject.