Jonathan Cohn lays out the benefits of California’s new exchange legislation — currently sitting on the Governor’s desk — and suggests that insurers’ opposition to the measure probably means that the state is doing something right:

Under two bills that the California legislature passed and Schwarzenegger is apparently expected to sign, the state’s exchange authority would have explicit permission to “contract with carriers so as to provide health care coverage choices that offer the optimal combination of choice, value, quality, and service.” That mandate, combined with the bills’ other provisions, means the exchange authority would be able to negotiate pretty aggressively over price and quality, excluding plans that don’t serve consumers well. That’s more or less what corporate benefit departments and the managers of public employee programs, like the Federal Employee Health Benefits Program, do for their members.

The California model would follow the Massachusetts example, where the exchanges have the authority to include only the most efficient and quality-centric issuers into their connectors. Massachusetts has controlled costs for the expanded population (although costs have gone up in the entire system) and increased consumer satisfaction. Jon Kingsdale, the former director of the Massachusetts Connector Authority told Cohn that allowing any plan that hits minimum standards to sell in the exchanges “would be like telling your grocery store they have to offer every single kind of bread baked by every single bakery. … The exchanges would be nothing more than an automated Yellow Pages.”

And Massachusetts residents agree. For instance, focus groups conducted by the Massachusetts Connector revealed that consumers felt that too much choice was “confusing” and “overwhelming.” “Participants expressed a desire for a manageable numbers of plans (e.g. three to four) offered by four to six carriers. In addition, consumers expressed difficulty making plan comparisons under the existing model.” “Instead, consumers preferred for information to be presented in a simple and standardized format that clearly distinguished between different benefit design options,” the Connector’s Fiscal Year 2009 report concluded.

The for-profit insurers are weary that they may be excluded from the market and are asking the Governor to veto the bills. But the exchanges are one of the only ways states can protect consumers from plans that do not offer good value and cost-effectiveness. As Kingsdale explained to me during our interview in October, “We estimate that we’ve done about 6 percent reduction in premiums and saved about $140 million a year on subsidized care for about 180,000 people. Because we’ve been able to a) be aggressive in selecting and setting rules for health plans and b) set up an Exchange that translates the various costliness of their networks into a price that the consumer understands,” Kingsdale said. “The consumer doesn’t understand the price of a visit or the price of a procedure, or the price of an x-ray and can’t shop on that basis, but can shop annually for a premium, or monthly. And the trick with the Exchange is to translate the generators of cost and value and quality into a package called a health plan from which consumers have a choice and they have both funding but they are the price differences. And so with that program, we’ve been able to do it and have substantial impact.”

Back in June, HHS unveiled interim final regulations to exempt health insurance plans in existence before March 23, 2010 — the day the Affordable Care Act became law — from many of the new regulations, benefits standards and consumer protections that new plans now have to abide by. The goal is to allow a consumer to keep their existing plan, while also ensuring that there are some basic patient protections built into these plans. But the exclusion comes with conditions. If the plans or employers make changes that undermine the spirit of the health law and significantly burden enrollees with lower benefits and increased costs, they have to come into compliance with all consumer protections:

- Insurers will lose their grandfathered status if they cancel coverage when a person becomes ill or impose lifetime limits on benefits.

- Insurers will lose their grandfathered status if they eliminate all benefits for a particular condition or if it increases deductibles or co-payments by more than the rate of medical inflation plus 15 percentage points.

- Insurers will lose their grandfathered status if an employer reduces its contribution so that its share of the total cost of coverage declines by more than 5 percentage points.

- Insurers will lose their grandfathered status if they increase co-payments for doctor’s visits to $45, from $30 — a 50 percent increase — while medical inflation was 8 percent.

- Insurers will lose their grandfathered status if they reduce the cap for covered services each year.

Insurers and self insured employers make policy adjustments all the time and over the last few years they’ve been slowly shifting the risks and costs of coverage to the individual. The grandfather regulations don’t really prevent these shifts as much as they discourage employers and insurers from stiffing beneficiaries with very high costs and insufficient benefits and shield consumers from drastic benefit cuts or cost shifts. In other words, they help you like what you have, but not necessarily keep exactly the plan you have. In fact, HHS estimates that a good percentage of small business plans and policies in the individual market will lose their grandfather status and look for cheaper coverage that already meets the new requirements. In this way, the grandfather regulations also serve as a bridge to gradually moving everyone into plans that have the kind of consumer protections that Americans say they want. By 2014 almost all plans will be in full compliance.

Republicans have long claimed that this violates President Obama’s pledge of ‘if you like what you have you can keep it‘ and tomorrow Sen. Mike Enzi (R-WY) plans to offer a privileges resolution that will try to strike the grandfather regs. It would only require a majority vote:

The Enzi resolution targets the agency’s “grandfathering” rule, which allows plans that existed before March 23, 2010 — the date the healthcare law was signed — to be exempt from certain consumer protections enacted in the law, as long as plans do not significantly reduce benefits or raise consumer costs. HHS estimated that approximately 40 percent to 70 percent of all employer-provided plans will maintain “grandfather” status through 2013.

Enzi argues the provision breaks President Obama’s frequent promise that Americans could keep their health insurance if they liked it.

“An estimated 80 percent of small businesses are expected to lose their grandfathered status based upon the regulations the Administration wrote,” Enzi said in a statement. “That means the small firms that do offer health insurance won’t be able to afford what they now provide.”

The amendment is more about message than substance. Republicans aides are telling Congressional Quarterly that they expect Majority Leader Harry Reid to successfully table the resolution and it will certainly fail if it moves forward. The GOP is using this as yet another opportunity to chip away at reform and rather than proposing its own grandfather standards, the party would allow any existing plan to avoid the new consumer protections, no matter how dramatically they cut benefits, raise co-pays, or lower employer contributions. Sadly, they’d be cutting off the very regulations that will help bring about the popular consumer protections they proclaim to support.

Yesterday, RealClearPolitics reported that “just five weeks away from a tougher Senate race than he expected against Republican John Raese,” West Virginia Governor Gov. Joe Manchin (D) was retreating from his support of the Affordable Care Act, and is now saying that he would join Republicans in repealing parts of the law. I asked the Manchin campaign about the Governor’s new position, pointing out that despite some reservations about Medicaid expansion, the Governor had said in March that he would have voted for reform and even argued that conservatives should allow the effort to succeed. The Manchin campaign sent me the following statement:

The Governor felt it was important to move the ball forward on healthcare reform and that something had to be done to help more working people obtain health insurance, so he said at the time that he would vote to do that. However, as more details have come out about what was included in the final version of the healthcare reform bill, there are several sections that he would now vote to repeal, including any provisions that allow for the funding of abortions and the provisions that are cumbersome to small businesses. He also believes people’s personal responsibility and healthcare choices should not be taken away by overreaching regulations. So knowing what he knows now, he would have fought for changes to the final version of the bill before voting and he would not have voted for it in its current form.

This obviously isn’t very specific (which abortion provisions are you referring to, governor?) and some of it, like the last part about individual responsibility, is downright nonsensical. But what we do know is that Manchin is more in the mold of Ben Nelson and less in the mold of his predecessor Robert Byrd.