TOPEKA — The Kansas Insurance Department has been awarded a $1 million federal grant to start putting together a health insurance exchange.
“As soon as (the money) gets here, we’ll be setting up a number of task forces and work groups that will focus on a number of issues that will need to be addressed in coming up with an exchange that’s best for Kansas,” said Linda Sheppard, director of the department’s accident and health division.
Under the new federal health reform law, states are required to have health insurance exchanges in place by Jan. 1, 2014, which is also when the law requires that everyone who can afford health coverage have it or pay a tax penalty.
Subsidies will be available to purchase through the exchanges for those with incomes between 133 percent and 400 percent of federal poverty guidelines, which translates to between about $22,000 and $88,000 a year for a family of four.
The exchanges are intended to give individuals and small businesses easy access to affordable, private health insurance.
Each state has the option of designing an exchange to best meet the needs of its residents. The federal government will oversee exchanges in states that choose not to develop one.
“The federal (health reform) law gives states quite a bit of flexibility to come up with whatever they think will work best from them,” Sheppard said. “So ours may look quite a bit different from Nebraska’s or Oklahoma’s or Missouri’s.”
Issues on the table
Sheppard said U.S. Department of Health and Human Services officials have asked states to consider several issues when designing the exchanges, including:
• Will the exchange be run by the state or by a private, nonprofit entity?
• How will it be funded?
• What will it do to prevent the imbalance that occurs when too many healthy people buy bare-bones coverage or too many sick people buy full-coverage plans?
• How will it ensure competition among insurers while at the same time assuring the coverage they offer meets the needs of the beneficiaries?
• How will it know when beneficiaries are eligible for coverage through public plans such as Medicaid or the Children’s Health Insurance Program?
“All of these issues were raised in the grant application and I’m sure will be addressed,” Sheppard said. “But at this point no decisions have been made. This is a discussion that’s going to be taking place over the next year or so.”
States still await the release of federal regulations expected to effect how the exchanges work.
Draft plan
“Two things are going on right now,” said Timothy Jost, a professor at Washington and Lee University School of Law, who is monitoring health reform for The Commonwealth Fund.
“The statutory scheme asks states to establish exchanges, but the exchanges have to comply with federal regulations which HHS doesn’t have out yet,” Jost said. “Also, the National Association of Insurance Commissioners is working on a model act for states to adopt. It published a draft last month and is taking comment now.”
Kansas Insurance Commissioner Sandy Praeger, a former NAIC president, leads the association’s Health Insurance and Managed Care Committee.
Jost said Kansas’ exchange deliberations are in line with those in other states.
“California, a few weeks ago, came out with the beginnings of an exchange,” he said. “Utah has come out with a small-employers exchange and Massachusetts’ exchange has been grandfathered in. But most states, I think, would be well-advised to wait on the federal guidelines and to see what the NAIC comes up with.”
Jost noted that some states’ legislatures either meet or deal with budget issues every other year.
“They have to move ahead as rapidly as they can,” he said. “I’ve heard that Montana, for example, has nearly completed an exchange bill so it can be in the hopper for the legislature to act on in January.”
The Montana legislature meets every other year. It did not convene in 2010. The Kansas Legislature meets every year.
Insurance agent roles
Jost said debate over the post-2014 role of insurance brokers and agents likely will be contentious.
“The (health reform) statute lays out at least two roles for them,” he said. “They can keep doing what they’ve always done but through an exchange or they can be what’s called a ‘navigator’ who will essentially help people navigate the new system. They have to be one or the other. They can’t be working for both.”
Kathleen Stoll, director of health policy at Families USA, is working on a review of issues affecting the exchanges.
“One of the big issues out there is how exchanges are going to interface with the state-run Medicaid and CHIP programs and with the (federal) health insurance tax credits that are going be available,” Stoll said.
“The way incomes fluctuate, it’s entirely possible for someone to be Medicaid eligible for half a year and then be eligible for tax credits for the other half,” she said. “For the exchange to function smoothly that kind of information is going to have to be exchanged cleanly and easily.”
Sheppard said a task force will address interface issues.
“I’ve had several conversations with (Kansas Health Policy Authority Executive Director) Andy Allison about this,” Sheppard said. “Medicaid is going to have to be heavily involved in all of the discussions we’ll be having over the next year. He agrees.”
The health policy authority administers the state’s Medicaid and CHIP programs, and the state employees’ health insurance plan.
Health plans taking shape
