Supporters and detractors of exchange system inquire about costs and timelines at NGA meeting

Even as they differ over the merits and defects of health care exchanges, state officials from across party lines continue to express concern over the regulatory uncertainty attached to ObamaCare.

This became apparent during the National Governor’s Association (NGA) two-day workshop entitled: “Timelines, State Options and Federal Regulations.” Over 120 governors’ representatives, cabinet secretaries and health department leaders took part in the session. Participants identified two key areas of concern that must be addressed before moving forward with full implementation of the Patient Protection and Affordable Care Act (PPACA), otherwise known as ObamaCare.

Gov. Bobby Jindal has already made it clear that he will resist setting up exchanges, which are meant to serve as state level conduits for the purchase of insurance. Governors Rick Scott (R-Fla.), Scott Parnell (R-Alaska), Susana Martinez (R-N.M.) and Rick Perry (R-Texas) have all expressed opposition to an exchange system in their states.

But Gov. CL “Butch” Otter of Idaho, Rep. Bill Cassidy (R-La.), and other GOP officials, disagree.
They view the exchange system as a viable tool for advancing patient-centered, market-friendly health care reforms that can lower costs and expand consumer choice.

The PPACA does allow for state discretion in how they craft and shape the exchanges. States can direct their existing health care agencies to oversee the new system, contract key functions out to private vendors, or partner with the federal government. But with implementation deadlines approaching, the federal government has failed to address key questions, according to an NGA policy brief.

“Given that the final federal regulations specifying the policies governing those activities have not been finalized, or in important instances, proposed, states are operating in a highly uncertain environment with looming deadlines,” the brief says. “Timely implementation places states in a position of needing to make basic decisions about how they will establish and implement insurance exchanges on the basis of incomplete guidance and regulations…The substantial ambiguity involving core elements of the exchange and Medicaid implementation, especially in light of the controversies associated with PPACA deadlines, which would lead to a federally operated exchange in their state.”

In many states, legislation for exchanges must be filed in November, which creates enormous hurdles in and of itself, NGA notes in its brief. In response, the various states have responded very differently. Some state officials have already moved to set up their own exchanges, while others like Gov Jindal are cutting their own path.  In August, Kansas became the second state to reject the ‘Early Innovator’ grant, a $31.5 million subsidy from the federal government awarded to seven states for implementing  ObamaCare. Oklahoma was the first.

Another major stumbling block impacting the construction of  state exchanges concerns the procurement of information technology (IT), the brief points out. For starters, the design and development requires advance notice of policy requirements, which have not been forthcoming from the federal government.  Moreover, the development of the exchange systems typically takes place over the span of several years to accommodate existing procurement rules.

Rep. Cassidy, who is a medical doctor and a vocal opponent of the federal health care law, has said that it may be advantageous for states to put their own “imprimatur” on a health care exchange before federal officials advance new regulations.  He cited the Utah system, which is already up and running, as a model for what might work in Louisiana and other states. But, at the same time, states need sufficient room and latitude to experiment with reforms tailored to fit their own unique circumstances and needs, Cassidy said.

The NGA report clearly shows that PPACA does not take health care policy in the right direction, Courtney Austin, a legislative assistant to Cassidy, said.

“The frustration with the law is bipartisan,” she observed. “Republican and Democratic states alike are awaiting federal guidance on many issues.” For example, the NGA reports that insurance exchanges must be ‘wholly created in a very short time period,’ and yet they present ‘major challenges,’ because the states must establish interconnected, automated systems to determine whether any particular citizen is eligible for subsidies and, if so, through which program. Besides the lack of direction, the states are also concerned about the costs and resources needed to implement the law.”

States also have good cause to be concerned that they may lose control of the Medicaid program, Austin said. A federal exchange could become the single point of entry to all of a state’s insurance affordability programs, she points out.

“ACA implementation requires major changes in existing Medicaid eligibility systems, which need to operate seamlessly with the yet to be detailed federal data hub and exchange systems, providing real-time, online eligibility determinations (under significantly reformed Medicaid income, asset, and eligibility rules),” the brief explains. “The challenge of contracting for IT systems services is particularly acute and mission-critical for the establishment of exchanges. Vendor capacity and the IT workforce are strained, especially as system adoption among providers has increased as a result of economic stimulus subsidies.”

Louisiana Department of Health and Hospitals officials estimate that the implementation of ObamaCare will cost Louisiana in excess of $7 billion over a 10-year period. Moreover, between now and 2014, Louisiana health officials also expect Medicaid enrollment to grow by more than 50 percent.

Kevin Mooney is an investigative reporter with the Pelican Institute for Public Policy. He can be reached at kmooney@pelicanpolicy.org and followed on Twitter.