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Don't Look Now, but State Health-Insurance Exchanges Are Gathering Steam

Contrary to popular belief, it's starting to lookas though some states will band together to form regional health-insurance exchanges instead of going it alone. That's a big deal, since the exchanges are a centerpiece of the healthcare-reform law, and many states appeared unprepared to build systems that will help individuals and small firms find affordable coverage on their own.

What's more, some state exchanges are going to include Medicaid as well as private insurance, which will make it much easier for people to move back and forth between state-assistance programs and commercial health plans. All of which suggests that the state/regional exchanges are emerging as a juggernaut that will be difficult to stop.

The Department of Health and Human Services (HHS) recently disclosed a list of states that will receive "early innovator" grants to set up the IT infrastructure for their health insurance exchanges. Kansas, Maryland, New York, Oklahoma, Oregon, Wisconsin, and a multi-state consortium led by the University of Massachusetts Medical School will receive a total of $241 million.

While most of these states are building on their existing information systems, they're all doing slightly different things. The idea is for the best approaches to be transferred to other states so they can establish their exchanges quickly and efficiently.

Each grant recipient must create a system capable of handling eligibility and enrollment in the exchanges, as well as premium tax credits and cost-sharing reductions for eligible consumers. And the systems must be able to communicate with state Medicaid systems, because it's expected that people will move back and forth between Medicaid and private insurance as their financial status changes.

But some states are going further and integrating Medicaid into the exchanges. Wisconsin, for example, envisions building a single web portal that residents can use to access subsidized and non-subsidized health care and other state-based programs. Altogether, the Wisconsin exchange is expected to host 160,000 individuals in the non-group market, one million employees of small businesses, and 770,000 participants in the Medicaid and BadgerCare Plus (for long-term uninsured adults) programs, representing nearly 35 percent of the state's population.

Oregon, similarly, is building a "seamless" exchange for individuals with incomes up to 400 percent of the federal poverty level (about $88,000). The Oregon Health Authority, which will administer the HHS grant, estimates that 516,000 Medicaid clients and 277,000 commercial insurance consumers will use the state's exchange to shop for and enroll in health coverage.

Beyond just allowing people to enroll in Medicaid, these exchanges could also allow them to choose from a menu of Medicaid managed care plans. Perhaps eventually, people could transition from Medicaid to a private plan offered by the same company that runs their Medicaid HMO. And someday, Medicaid and subsidized private plans might be interchangeable and pay providers the same -- a major step toward universal access to care.

Some of the early innovator states are planning to build multi-state exchanges. For example, Kansas is in early discussions with Missouri about collaboration. And the consortium headed by the University of Massachusetts Medical School includes Connecticut, Maine, Massachusetts, Rhode Island and Vermont.

All of this makes abundant sense. Budget-strapped states should work together to build insurance exchanges in their regions so they can benefit from economies of scale. This would even achieve a long-cherished Republican goal -- to allow the purchase of insurance across state lines -- but with a difference. Because the Affordable Care Act specifies what kinds of products must be offered in the exchanges, no state can lowball the market by allowing bargain-basement plans that won't protect people when they get sick.

Image supplied courtesy of admanramblings.
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