California became the first state to establish health care exchanges under the Affordable Care Act last night, after Governor Arnold Schwarzenegger signed a series of last-minute health bills into law, overcoming opposition from Anthem Blue Cross and the California Chamber of Commerce. President Obama called Schwarzenegger Wednesday night to “underscored how important this legislation is for California and the rest of the country“:
The legislation signed by the governor Thursday – Senate Bill 900 and Assembly Bill 1602 – will establish the California Health Benefit Exchange and an independent, five-member oversight board appointed by the governor and the Legislature that will be tasked with defining how the exchange will operate.
The exchange will serve as a government-run marketplace from which at least 3 million Californians, many now uninsured, would be able to buy health coverage. It could give individuals and small businesses the same buying power as corporations and other large employers.
The exchange also will funnel billions of dollars to California in subsidies, perhaps as much as $10 billion over 10 years.
Significantly, the California Health Benefits Exchange will be able to “bargain with insurance companies on behalf of consumers and create a relatively easy method for insurance customers to compare the benefits, costs and exclusions in policies offered by competing firms.” State lawmakers hope that by negotiating prices “for a large volume of individuals – getting group discounts the same way that large employers do” beneficiaries will see a “downward pressure on prices.” The California Exchange is partly modeled on the Massachusetts experiment, where regulators used the exchange’s clout to achieve a “6 percent reduction in premiums and saved about $140 million a year on subsidized care for about 180,000 people.”
The Exchange won’t be operational until 2014, but California HHS Director Kim Belshé notes that to regulators it feels like “2014 is tomorrow.” “Developing this kind of exchange is going to take some time, and we have got to get on with it,” she said. First, the state has to appoint the 5-person board (with appointees from the governor, Assembly and Senate), and then that board has to hire an executive director. That process alone could take months. “In order to flip the switch on the exchange, the state will need to test and make sure everything is up and running by the middle of 2013. And the federal government will require readiness by the start of 2014. That’s not that much time.” The state will benefit from the approximately $1 million dollars in planning grants the federal government announced yesterday and future enrollment grants.
Massachusetts, Utah, and Oregon are already operating exchanges and HHS expects other states to begin establishing their exchanges in 2011. If states fail to build an exchange, the federal government will enroll residents in a federal marketplace.
President Obama issued the following statement:
I want to congratulate Governor Schwarzenegger, Speaker Pérez, President Pro Tempore Steinberg and the members of the California State Legislature for passing and signing the bipartisan California Health Benefits Exchange legislation. They are taking an important early step toward reforming our private insurance marketplace so that California families and small businesses will have high quality and affordable health insurance choices in 2014 when reform is fully implemented. I look forward to continuing to work with and provide resources and support for all states as we work toward creating a new competitive health insurance system that lowers costs for consumers and businesses, increases quality, and reduces our deficits.