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Missing deadline won't prevent Missouri from setting up a health exchange

In Health

10:02 am on Fri, 11.16.12

Today marked the first major deadline for states planning to set up their own health-insurance exchanges as mandated by the Affordable Care Act. And Missouri Gov. Jay Nixon followed through with a letter Friday to the federal government stipulating that the state will be unable to meet the deadline, and won't be setting up a state exchange.

But missing the deadline, as Missouri is doing, doesn’t mean a state can’t create an exchange in a later year.

Kathleen Sebelius, secretary of health and human services, made that point in a letter Thursday to some state lawmakers, saying “A state may apply at any time to run an exchange in future years.” Observers say that’s one of the overlooked issues surrounding the controversial health reform law.

Exchanges allow eligible consumers to use the internet to buy affordable health insurance in the same way many use internet portals now to find discounts for airline tickets.

Today’s deadline required states to declare their intentions to set up their own exchanges. These states have until Dec. 14 to submit an exchange blueprint or plan for federal review and approval.

Instead of setting up their own exchanges, some states plan to create partnerships with the federal government. Those states have until Feb. 13 to send both their declarations and blueprints to the federal government. Illinois is among states taking the partnership approach. No matter the setup, all exchanges must be up and running by October 2013, when open enrollment begins.

In his letter, Nixon noted that voters had approved Proposition E on Nov. 6.  The proposition forbids the Nixon administration from taking any action to set up an exchange unless it first gets approval from the legislature or voters.

State Sen. Scott Rupp, R-Wentzville, argued after the vote that the state-based exchange issue is now dead and buried in Missouri. 

Nixon told reporters last week that it now will be up to the federal government to set up an exchange in Missouri. He made clear in his letter to Sebelius that he'd prefer to have a state exchange, but that he has no recourse because of Proposition E.

But missing the exchange deadlines this year or next doesn’t necessarily mean an end to setting up a state-run system, according to a federal health official and an official at the Missouri Foundation for Health. They point to a little discussed option that allows states like Missouri to create an exchange in a later year – in 2015 or 2016, for example.

The option comes into play because each year, states must tell the federal government of any changes they want to make in their exchanges, including running the exchange themselves, letting the federal government take control or partnering with the federal government.

Creating an exchange in the future isn't an option in the eyes of proponents of Proposition E, including Lt. Gov. Peter Kinder. He said in a statement Thursday that the proposition had put to rest any discussion of Missouri setting up its own exchange.

He argues that exchanges will cost states up to $100 million a year and “will set up state officials to take the blame when Obamacare increases insurance premiums and denies care to the sick.”

He is urging lawmakers to “reaffirm Missourians’ opposition to Obamacare by refusing to create a health exchange or expand Medicaid.”

But Thomas McAuliffe, a policy analyst at the Missouri Foundation for Health, believes lawmakers will revisit this issue. He predicts that Missouri will quickly get on board once the federal government begins determining certain health policy issues for Missouri.

Thomas McAuliffe
Thomas McAuliffe

McAuliffe cautions that nobody knows yet what requirements the federal government will impose on states not setting up their own exchanges. One potential model is simply to certify insurers; the other model would be to give the federal government a more active role not only in certifying plans but in setting limits that might include rules, such as telling insurers they can’t raise prices by more than 10 percent a year, for example.

“What we will see is a federally run exchange that may tinker around the edges of what’s included, basic benefits and acceptable pricing,” McAuliffe says. “This will quickly put fear into the state legislature. Its members will say, ‘They are going to be mandating prices.’ And we will have a Missouri state-run exchange very quickly thereafter.”

McAuliffe adds that “not only is there a possibility, there is a high probability down the line that the Department of Insurance and the state of Missouri are going to want to administer the exchange and the federal government will willingly get out of the job if they see that the state has the capacity.”

Another issue that will put pressure on Proposition E, he says, is fear among state workers of being sued for touching anything with “insurance exchange” written on it. McAuliffe says this hands-off reaction could mean state workers would be reluctant to cooperate with the federal government in any way to set up a federally created  exchange.

“So what if we have a federal exchange and (federal officials) ask our state to participate in decision making or to help them in implementing it? What state government employee is going to contribute when there is a fear that they might get sued? Everyone sees the government part of it. But they don’t see the lawsuit part of it.”

His prediction is that Missouri eventually will “have a partnership (exchange) in 2015 when the insurance companies and hospitals start pressuring the legislature, and when state government sees how much money the federal government is willing to give to expand Medicaid since we are getting these exchanges up and running. I think it’s the kind of calculus that no politician can ignore.”

Kinder is accurate in estimating that an exchange could cost a state up to $100 million a year to expand Medicaid to cover those earning up to 133 percent of the federal poverty level – about $30,000 a year for a family of four.

But McAuliffe says the other part of the equation is that the federal share under expanded Medicaid would be $8.4 billion for Missouri.

“That’s a lot of money,” he says. “It’s a great deal for both our economy and our citizens.”

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