State health insurance exchanges taking shape nationwide: Reform progressing
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* Kim Krisberg

As work moves forward to implement the nation’s historic health reform law, many of the details will be left to the states. At the top of the list is creating state-based health insurance exchanges — a pivotal process and one that can mean the difference between success and the status quo.

Almost every state has begun developing a health insurance exchange, and millions in federal funds have been distributed to assist states with the process. Progress varies widely from state to state, with some states still in the early planning stages, others having already enacted legislative frameworks and others simply refusing to take part. Under the 2010 federal health reform law, officially known as the Patient Protection and Affordable Care Act, every state is required to have an exchange up and running by January 2014. According to the Congressional Budget Office, about 24 million people will have purchased coverage via state insurance exchanges by 2019.

While the health reform law allows states substantial flexibility in designing how the exchanges will function and be governed, they are all expected to result in centralized, competitive marketplaces where individuals and small businesses can learn about, shop for and purchase affordable health insurance plans. The exchanges will also screen consumers’ eligibility for programs such as Medicaid as well as whether they qualify for subsidies to help them purchase private coverage.

The exchanges are predicted to go far in reducing the nation’s increasing uninsurance numbers — last measured at more than 50 million in 2009 — but like much of the health reform debate, there is some resistance. For example, Louisiana officials announced in March that they will not create a health insurance exchange, which means federal officials will step in to set up the exchange instead. And in early May, the U.S. House of Representatives passed a bill that would repeal mandatory funding to assist states in developing exchanges. However, most states — even those challenging the health reform law in court — are moving forward to come in compliance with the law.

One thing does seem certain, however: States will imprint their own vision on the exchanges and their governance.

“We’ll find a solution that’s consistent with our culture and our values,” said Julie Cox-Kain, MPA, chief operating officer at the Oklahoma State Department of Health. “I think we’ll find our way to something that will be distinctly Oklahoman.”

In Oklahoma, much of the work to develop the state’s exchange has been happening within the health department, such as overseeing advisory and stakeholder meetings as well as surveying current needs and gaps, Cox-Kain said. While the process is still in the early planning stages, officials are looking toward existing state programs that resemble an exchange to build upon, she said. For example, the Oklahoma Health Care Authority already runs Insure Oklahoma, a subsidized health insurance program for small businesses and low-income adults.

“We want to build an exchange in a really fiscally responsible manner and there’s no need to duplicate what we already have,” Cox-Kain told *The Nation’s Health*. “We’re starting with a relatively high rate of uninsured (residents) and the goal is to make significant improvements in that.”

Cox-Kain said that public health professionals bring unique skills to the table, noting that “we’ve been really well received as a convener of these (advisory) groups because we’ve got that level of credibility…we can help keep people focused on the larger picture.”

But even in some states that have begun the process, the exchanges are meeting resistance. In April, Oklahoma Gov. Mary Fallin decided to return a $54 million Early Innovator grant from the U.S. Department of Health and Human Services intended to help the state set up its exchange. The state had previously accepted a $1 million HHS planning grant. In rejecting the innovator funds, Fallin announced that Oklahoma will establish a Health Insurance Private Enterprise Network “to prevent the establishment of a federal health care exchange in Oklahoma,” according to a news release from Fallin’s office. The network will be governed by a board overseen by the state’s insurance commissioner and will consist mostly of representatives from the private sector. While the recent announcement may alter the state’s direction, Cox-Kain said work continues to “develop a plan and deliver it to our governor.”

Across the country in Maryland, Gov. Martin O’Malley signed legislation in April establishing a framework for the state’s health insurance exchange, making Maryland one of the first states to have such a legislative structure in place. As health reform measures move forward, an estimated 300,000 to 400,000 additional Marylanders are expected to become insured, with the majority finding insurance via the state’s insurance exchange, according to Joshua Sharfstein, MD, secretary of Maryland’s Department of Health and Mental Hygiene and a member of the governing board overseeing development of the exchange. Sharfstein said officials are not only interested in “checking off the boxes regarding the requirements of the exchange, but in using the process of health reform to improve the health of the people of Maryland.”

“For health care reform to succeed, costs have to be controlled,” Sharfstein told *The Nation’s Health*. “Public health should bring its expertise to bear on that. In other words, if the exchange is going to encourage certain types of health delivery arrangements, what are the right ones to encourage?”

According to the legislation signed in April, Maryland will be home to a single risk pool — meaning the same rules will apply to insurers offering plans inside and outside of the exchange. The rule is designed to reduce an insurer’s ability to pull out healthier residents for coverage outside of an exchange, while leaving a disproportionate number of people in poor health and with high health costs inside the exchange. Each state will decide whether to create such single risk pools. It is an issue many health advocates say could determine the success of an exchange.

“We’re trying to create a system that isn’t like the one we have today, a system in which insurers can’t do so much cherry-picking anymore,” said Sarah Lueck, a senior policy analyst with the Center on Budget Policies and Priorities.

State exchange governing boards will be key in ensuring such level playing fields, which is why their makeup should include more than just insurers, said Peter Beilenson, MD, MPH, health officer of Howard County, Md. Beilenson is founder of the Maryland Nonprofit Health Insurance Co-op, which hopes to offer coverage via Maryland’s insurance exchange, with a special mission to reach families for whom purchasing insurance will still be unaffordable.

The co-op is based on three main pillars, Beilenson said: establishing primary medical homes for patients; eliminating fee-for-service practices, which often incentivizes providers to order more tests and procedures; and using evidence-based practices. The co-op will be open to anyone using the exchange, he said. Beilenson noted that even with subsidies, a family of four living on $66,000 a year will have to pay between 10 percent and 20 percent of its take-home income on health care.

“There’s going to be a whole chunk of folks for whom health insurance will still be out of reach,” he told *The Nation’s Health*.

Kathleen Stoll, deputy executive director of Families USA, said that despite disagreements and resistance, she is hopeful that states will be ready to meet the 2014 deadline.

“I’m more optimistic than some folks,” she said. “I didn’t expect it to be easy.”

For more information on implementing health insurance exchanges, visit [www.familiesusa.org](http://www.familiesusa.org) or [www.cbpp.org](http://www.cbpp.org).

*   Copyright The Nation’s Health, American Public Health Association