CQ HealthBeat’s John Reichard is reporting that HHS officials are staying “mum” on the structure of the health insurance exchanges that the federal government will erect in states that decide not to establish their own insurance market places by 2014, declining to say when that decision would be announced or even if it would be made this year:
A big question is how the federal government will run exchanges and specifically whether it will be an active purchaser, meaning it can deny insurers a place in the exchange if they don’t offer consumers a good deal. The recent HHS-proposed regulation on exchanges did not say.
[Steve Larsen, director of the Center for Consumer Information and Insurance Oversight] said Thursday that “we will be releasing further guidance in some form — it’s not clear whether it will even have to be a regulation — that would clarify how we will be setting up an exchange or portions of an exchange.” “I can’t describe for you now the particular time frame,” Larsen added. “I can only say that we know that’s an issue that has to be resolved.”
One possibility is that HHS would give the markets inside exchanges a chance to stabilize before becoming an active purchaser, Larsen said… Starting out with what’s called an “open model” — in other words, one in which exchanges don’t exclude insurers based on the prices they charge — is “certainly part of the mix of thinking about which model” the federal government will employ, Larsen said. It’s possible that both the federal government and state governments could decide to start with an open model and make a transition to becoming an active purchaser later, he said.
Progressive health advocates who have long hoped that states — and the federal government — would follow the models of Massachusetts and California in establishing exchanges that could keep out inefficient or poorly designed health care plans and bargain on behalf of its beneficiaries. Still, not all states will have the luxury of denying entrance to inefficient providers, however. States “that sit in highly concentrated insurance markets are limited in how selective they can be,” and states in which the exchange represents a small part of the commercial market will also have little leverage, as will states with a sicker risk pool.
But despite all this, the feds would be smart to adopt a more aggressive purchasing model and set robust consumer protections and standards. Not only would such an approach help meet the goals of the exchanges — connecting individuals and families with affordable health care options — but it would also discourage some states from abandoning their own exchanges in favor of the federal option. HHS would face substantial cost increases as conservative governors who are reluctant to build exchanges in the first place begin to see the federal exchanges as an ideologically agreeable (and cheaper) alternative.