Terry Gardiner and Isabel Perera have put out a new report laying out a road map for states, policymakers, health reform advocates, and small-business leaders in implementing the rarely discussed, but important SHOP Exchanges — the Affordable Care Act’s health insurance marketplace that will provide an array of health insurance plans for small businesses and their employees in 2014. Under the health care law, states may avoid SHOPs altogether and establish a single exchange that serves both individuals and small employers, but are required to enact some kind of insurance marketplace by 2014 or turn it over to the federal government.

Beyond a few broad requirements, however, states have significant flexibility in implementing SHOPs, leading Gardiner and Perara to examine the key decisions states will have to make to ensure that the business exchanges provide high-quality, low-cost health insurance “that compares favorably to insurance offered in the outside market”:

– Type of purchaser: Exchanges that follow the active purchasing model choose high-value plans to meet the specific needs of small employers and their employees, while those that act as passive purchasers try to maximize plan options by allowing any qualified carrier to participate.

– Role of brokers: Brokers are more useful in the small group exchange than the individual exchange, since the needs of small employers are greater than that of individual purchasers. Employers rarely employ insurance experts to weed through the intricacies of comparing different policies.

– Structure: States can merge the individual and small-group pools and form one exchange, separate the two pools and form two exchanges, or separate the two pools and administer them under one exchange. States should consider demographics, projected pool sizes, the spread of risk, administrative expenses, and premium rate impact in all markets before reaching their decisions.

– Choice: Small employers who offer health coverage typically select their employees’ plan. Only larger employers are able to offer multiple insurance plans to their employees. The state will have to decide how the exchange should act.

– Additional services: Exchanges may provide a variety of administrative services that can help small businesses cope with the administrative work of providing health benefits and address their other human resources needs.

The report also offers this table of real world experiences that can guide state decision making:

Read the full report here.

Phil Galewitz’s worries that states’ efforts to control costs in their Medicaid program by cutting reimbursement rates to providers will lead to serious access problems for beneficiaries and only exacerbate physician shortages:

The payment cuts, which require federal approval, are part of a larger effort by states to reduce the cost of Medicaid, typically the largest- or second-largest expenditure after education. In some states, dental services and other optional benefits have gone under the knife. And many states are requiring enrollees to sign up for private Medicaid managed care plans.

There are two things to say about this. One is that some of these cuts could be prevented if the federal government kicked more money to the states — to make up for the cuts that have gone into effect after the additional FMAP increase in the stimulus ran out — and asked them to pay back the dollars once revenues increase. (That’s the idea Judy Feder and John Halahan recently proposed.) And the other is that it simply follows that if states are faced with a situation where they have decreasing revenue (in part due to the recession) and less federal dollars to spend on Medicaid, they will make provider cuts (as well as many other reductions) that will leave beneficieires without doctors and sink the program. This does not bode well for conservative proposals that seek to transform Medicaid into a block grant system that doesn’t keep up with projected health care costs. We’d see this happen and then multiplied.

The Hill’s Sam Baker has an interesting piece examing the progress states have made in establishing health insurance exchanges before the 2013/2014 deadline. He concludes that the new market places are not being established fast enough, putting “state legislatures are at risk of handing over the central component of the reform effort to the federal government, which will set up the exchanges for states that fail to do so”:

Governors in 10 states have signed laws that establish an insurance exchange — a new marketplace where individuals and small businesses will be able to buy insurance.

“I think that a year ago, many of us who work with states would have predicted that more states would have passed legislation,” said Anne Gauthier, senior program director at the National Academy of State Health Policy. “Although exchanges are about as bipartisan an idea as perhaps exists in the health policy world … politics has played very heavily at the state level.”

Establishing an exchange is a mammoth undertaking, and states don’t have a lot of time to complete the task.

The exchanges must be up and running by 2014. But it’s in 2013 that the Health and Human Services Department will evaluate each state’s progress and determine where it needs to step in with a federally run “fallback.” [...]

But even in many of the conservative states that haven’t passed an exchange bill, Gauthier said, there’s still a strong desire to retain control of the program. And HHS officials have unequivocally said they want the states to create their own systems.

The exchanges, it’s worth reiterating, were actually the brainchild of the Heritage Foundation and are generally built on the conservative construct of competition as means to lowering health care costs. The Republican governors who are resisting implementing the measure are doing so out of political consideration — Obama included the idea in his health care reform law and so it must therefore it must be bad — but will have a hard time explaining why allowing the federal government to run the exchange makes more ideological sense than designing a state-based marketplace.

As for what would make for better policy, that’s unclear. The conservative states are more likely to adopt a model that would not allow the exchange to actively negotiate with insurance plans and eschew strict conflict of interest rules that preventing insurers and other health care sectors from having too much influence over the operations of the new structure. And if the federal government provides a more consumer friendly alternative, then state residents could actually be better off if their governors left the exchanges to HHS.

Politico’s Jen Haberkorn wonders what’s happened to the GOP’s pledge to stop at nothing to “repeal and replace” the Affordable Care Act and discovers that a combination of fatigue for fighting the uphill battle and the political fall out following Rep. Paul Ryan’s (R-WI) budget have made Republicans somewhat weary of pressing ahead:

Rep. Steve King (R-Iowa), one of the House’s most ardent supporters of repealing or defunding the law at all costs, says it has become more difficult to get the attention of House leaders.

“I can’t get any traction,” he said of his effort to repeal or defund the law. “You can’t create something in this Congress unless leadership approves it.”

He questioned whether Republican leaders are willing to repeal the whole law if it means also repealing some of its popular provisions.

“There’s a little bit of an undercurrent that I pick up among well-positioned people in this Congress who think there could be some redeeming qualities of Obamacare,” pointing to statements Republican leadership have made in support of a handful of the law’s policies, such as banning insurers from denying patients because of preexisting conditions or allowing children to remain on their parents’ insurance through age 26.

This “undercurrent” for supporting portions of the law is also prevalent among the candidates in the 2012 presidential field, who regularly concede that there is some “good” in the measure — after all, many have previously embraced its most controversial provisions. And, now that Americans are enjoying some of the benefits of reform — at least 600,000 young adults are now obtaining coverage through their parents’ plans, seniors are taking advantage of the new preventive care measures and receiving drug discounts — the Republican leadership is heeding a key lesson from the Ryan budget battle: campaigning on taking away coverage and increasing cost is not a winning political strategy.