California Leaps While Other States Merely Study Health-Insurance Exchanges

Last Updated Oct 4, 2010 6:44 PM EDT

By signing a pair of bills passed by the California legislature, Gov. Arnold Schwarzenegger has made his state the first to authorize a health insurance exchange in accordance with the Affordable Care Act. Some other states, meanwhile, are consulting companies that run insurance websites before they consider bills to establish exchanges. During this electoral season, it seems, studying the issue is seen as more politically prudent than diving into it.

Meanwhile, the $49 million that the feds are giving 48 states and the District of Columbia to do those studies is creating a new market for companies that have online insurance marketing experience, reports Anna Edney in a Washington Post/Bloomberg article. Among the companies that are meeting with officials from a number of states are Choice Administrators of Orange, Calif., and Connecticut Business & Industry Association of Hartford, which already runs a small business insurance exchange. In addition, EHealth, a large e-insurance operator, has won a $19 million federal contract to build and operate a federal website that will allow consumers to compare state-by-state insurance options.

The reform law doesn't allow private companies to run state insurance exchanges. But they can maintain websites, operate call centers, and handle billing, among other services. Considering the sheer size of the future exchanges -- which are expected to enroll about 24 million people when they're fully functioning -- this presents a real business opportunity for firms in a variety of fields.

The Affordable Care Act requires the states to implement insurance exchanges for individuals and small businesses by Jan. 1, 2014. They must build the infrastructure for the exchanges by January 2013. If the states can't or won't do this, the federal government will do it for them. Today, the only states with functioning exchanges are Massachusetts and Utah. These were established before the ACA's passage, so they will have to make some changes to comply with the federal law.

Besides helping states create web platforms that will be easy for consumers to use, the federal study grants can be used for any of these purposes:

  • Assess a state's IT systems and delineate new requirements;
  • Work with community organizations to include the public in the planning process;
  • Plan consumer call centers;
  • Hire staff and determine staffing needs;
  • Plan coordination between the exchange and Medicaid and the Children's Health Insurance Program;
  • Establish performance benchmarks.
Alaska and Minnesota turned down the exchange grants. Alaska did so because it's currently involved in a 20-state lawsuit against the federal reform law. Minnesota spurned the money because state governor Tim Pawlenty, expected to be a Republican presidential candidate in 2012, is refusing to accept any federal health grants.

Which brings us back to politics. If states use the study grants to come up with feasible exchange plans, and if they start involving stakeholders in discussions, it will be much harder for them to refuse to participate. But in the end, each state will still have to pass legislation enabling their exchanges -- and that will be a much higher hurdle to pass.

Image supplied courtesy of Flickr.

  • Ken Terry

    Ken Terry, a former senior editor at Medical Economics Magazine, is the author of the book Rx For Health Care Reform.