State health exchanges: why Republicans have opted outBMJ 2013; 346 doi: http://dx.doi.org/10.1136/bmj.e8616 (Published 02 January 2013) Cite this as: BMJ 2013;346:e8616
On 1 October 2013, millions of Americans aged 18 to 64 will be able to sit down at their computers and within a few minutes obtain health insurance, many of them for the first time. These people, who are not covered by their parents or their workplace, will enter a cyber supermarket that will fulfill the goals of the Affordable Care Act—also known as Obamacare.
Sustained as law by the United States Supreme Court in June 2012, and preserved by the re-election of Barack Obama as president in November, the Affordable Care Act is slowly grinding its way into the health insurance market. Key elements of the act are the health insurance exchanges—the places where healthcare plans are certified by a state agency and then set loose on the market. The plans will be run by individual states, state-federal hybrid agencies, or—if states opt for this—the federal government.
In a political anomaly, most of the states with Republican governors who have carried the banner in favor of “states’ rights” for decades have decided to let the federal government handle their state plans.
Overall, state run exchanges are being established in New York, Vermont, Massachusetts, Rhode Island, Connecticut, Maryland, Kentucky, Mississippi, Minnesota, Colorado, New Mexico, Idaho, Iowa, Oregon, Washington State, the District of Columbia, California, and Hawaii. State-federal partnership exchanges are being established in Delaware, West Virginia, North Carolina, Ohio, Michigan, Illinois, Arkansas, and South Dakota.1
Although it might be possible for these lists to change, for the rest of the country, the federal bureaucracy in Washington, DC, will run the online insurance markets for individual states—almost all of which have Republican governors, many of whom are receiving kudos from conservative groups for not participating with their own state-run exchange. How did this headscratching turn of events occur?
In Florida, for example, with an estimated four million people who will need to use the exchanges, Republican governor Rick Scott delayed initiating groundwork because he was waiting for the Supreme Court decision that was “certain” to overturn Obamacare. The court, of course, affirmed it.
Scott then delayed the groundwork because it was “certain” that Mitt Romney would be elected president, and Romney had promised to get rid of Obamacare on “day one” of his administration. By the time Romney lost the election it was too late for Florida to get its act together, and on 14 December, Florida slipped into a federal run exchange.
“Who runs the exchanges might not be as important as how the exchanges themselves are run,” suggested Kip Piper, an authority on Medicare, Medicaid, health reform, and the Affordable Care Act, and a consultant to numerous policy think tanks and public relations agencies. An official in the US Department of Health and Human Services under Secretary Tommy Thompson during the George W Bush administration, Piper admitted that he is obsessed with the ramifications and the workings of the Affordable Care Act. In a long interview with the BMJ, Piper outlined how the exchanges will work for people who have to purchase health insurance or face a tax liability.
Piper explained that in early 2013, health insurers will start to submit healthcare plans to federal or state agencies for review of their benefit packages so the plans can be regulated. “The insurers have to offer several levels of plans; they have to structure the premiums in a certain way. If the health plan meets those requirements in any individual state, then that plan can be sold in the exchange,” he said.
On 1 October 2013, and continuing through 31 March 2014, open enrollment for the health insurance exchange will commence. Piper said people can go to a website to enroll. They will also be able to get assistance on the phone if they need it.
Once online, consumers type in their basic information: name, birthday, social security number, and address. The computer will then ask verifying questions regarding where they live and work, and personal identification questions that only they can answer.
The computer at the health exchange will link that number to Medicare, Medicaid, social security, the internal revenue service, and homeland security. Then, Google-like magic will be used to display eligible plans. It will compute family size, age, and income and will give choices of multiple plans. The system will also ensure that children are eligible for coverage under various family and government plans.
Pick a plan
Consumers can then make personal choices—for example, do they want a plan with a low deductible and high premiums; a high deductible and low premiums; plans with no, low, or high co-payments?
The last step is to determine whether the consumer is eligible for subsidies based on income. Subsidies will be available to families of four with yearly incomes up to $92 000 (£56 000; €69 000), Piper said. He suggested that most families in the US who have to use the health exchanges will be eligible for some form of subsidy. “For some people the premiums will approach zero because the federal subsidies will cover almost everything. As people’s incomes go up so will their premiums,” he said.
Coverage will start on 1 January 2014. Piper said that the insurance exchanges will be able find the best plan quickly by an online search. He anticipated that the computer programming will prioritize plans that would suit the client. Initially, the states and the federal government are likely to have hundreds of plans from various (if not hundreds of) companies. According to Piper, some companies might offer as many as 50 different products. Some states might limit the numbers of plans that can be certified—but this will be possible only in states that have opted to run the exchange themselves.
Some insurance plans will offer services that companies have not offered before: “Companies are going to have to sell products amid a whole host of new regulations that represent very significant changes in how health insurers operate, what they have to cover in the way of benefits, the premiums they can charge, [and] the way they can vary premiums on the basis of the individual consumer,” Piper said.
Major regulations that will affect health insurers include:
Guaranteed issue and guaranteed reissue. “You cannot be turned down unless you don’t pay premiums or commit fraud,” Piper said
Insurers cannot exclude and must cover pre-existing conditions
Insurers will have to cover all mandated health prevention services recommended by a committee of the federal government, and the health insurers may not charge for it. Such services include mammography, prostate examinations, and vaccinations
From 2014, health insurers may not vary premiums for groups or individual people based on health status. This has a considerable effect, because it means that healthy people will pay substantially higher premiums and sicker people will pay substantially lower premiums
From 2014, insurers must charge the same premiums regardless of sex—that is, they may not charge women more than men. Because women tend to use health services more than men, women’s premiums will go down and men’s will go up
Under current insurance plans, a person aged 62 years pays five times that of a person aged 20 years. Going forward, insurers may adjust on only a 3:1 ratio
“In general, the younger, the healthier, and men will subsidize the older, the sicker, and women,” Piper summarized.
Cite this as: BMJ 2012;345:e8616
Competing interests: All authors have completed the ICMJE uniform disclosure form at www.icmje.org/coi_disclosure.pdf (available on request from the corresponding author) and declare: no support from any organization for the submitted work; no financial relationships with any organizations that might have an interest in the submitted work in the previous three years; no other relationships or activities that could appear to have influenced the submitted work, aside from being a Medicare recipient.
Provenance and peer review: Commissioned; not externally peer reviewed.