One thing sure amidst uncertainty over exchanges: Consumers will pay more


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As components of the 2010 Patient Protection and Affordable Care Act (ObamaCare) begin to be implemented, uncertainty lingers.
According to the National Conference of State Legislatures, only 19 states — including the District of Columbia — decided to run a state-based health insurance exchange. Pennsylvania is not one of these states.
Even though the state performed its due diligence by completing studies, talking with stakeholders and working on funding to create a state-based exchange, Gov. Tom Corbett notified the Dept. of Health & Human Services (HHS) Pennsylvania would not establish a state-based exchange.
The lack of regulations and unanswered questions, said the governor, prevented Corbett from assessing whether an exchange would be efficient and cost-effective for taxpayers.
Health insurance exchanges are designed to create a more organized and competitive market to buy health insurance. They should provide information to help consumers understand the many different choices between health plans.
“What happened was we had asked a number of questions of the federal Dept. of Health and Human Services back in August or September,” says Christine Cronkright, spokesperson for the governor’s press office. “Those questions went unanswered for a long period of time. We got to a point where we couldn’t go any further in exploring what was the best option for Pennsylvania without answers to some of our questions about governance, costs, financing and the general operations of a state-based exchange.”
The state received some answers days before its December deadline to sign on, too late to make an informed decision according to the Corbett Administration. Apparently the majority of other states agreed and decided to allow the federal government to create and operate the exchanges.
“There’s a lot of things you can’t answer right now,” says Paul Fronstin, Ph.D., director of the Employee Benefit Research Institute’s health research program, Washington, D.C. “Everyone wants answers and we are still sort of in limbo. It put states in a difficult position. At this point, there’s a lot that we don’t know about the exchange and how they are going to operate and what they are going to look like and which plans are going to be offered.”
According to Fronstin, the exchange will cater to individuals and businesses with fewer than 50 employees.
“They are truly for the small group market and this is the market that doesn’t even have to offer insurance,” he says. “The exchange may allow them to offer more options.”
Fronstin believes it may be too early to see what may be different about the exchanges due to continued lack of knowledge overall.
Other industry observers share that opinion and agree with Corbett’s decision.
“We believe that rejecting a state-run health- care exchange was the best move for Pennsylvania taxpayers and consumers,” says Elizabeth Stelle, policy analyst with Harrisburg-based Commonwealth Foundation. “Exchanges don’t really offer the flexibility or the benefit that they have been portrayed as providing. Health care exchanges don’t help us reduce the cost of health care.”
Stelle believes health insurance exchanges will inhibit competition and inflate prices, in part due to additional bureaucratic and administrative layers.
“If you look at what’s happened in other places where health exchanges have been implemented, you will see that coverage hasn’t gone down in terms of costs, that people actually spend more on their health care in the exchange model,” she says. “In Massachusetts we saw that. As health-care costs go up, you are going to see more fees and more taxes being imposed on folks, and it’s very likely you may see those costs come in the form of new business taxes.”
According to Stelle, Health & Human Services has already implemented a 3.5 percent “fee” on insurance companies participating in the exchange. HHS expect the fee to generate between $30- and $50-million annually to pay for the administration of the health insurance exchanges, a fee Stelle expects insurance companies to pass on to consumers through higher premiums.
Higher premiums represent only one concern about the exchanges.
“Federal rules regarding the establishment of state-run health insurance exchanges substantially constrain state prerogatives with respect to the design and operation of state exchanges,” says Scott Harrington, Ph.D., professor of the health-care management department of the University of Pennsylvania’s Wharton School. “States that establish their own exchanges face the potential for incurring significant costs that may not be justified given those constraints.”
Harrington acknowledges the uncertainty that remains.
“While the rules promulgated to date leave considerable uncertainty about how federal exchanges will operate, the effects of the health-care law on consumers are likely to be similar whether the state or federal government runs the exchanges, at least in the near term,” he says. “In the longer term, it appears that states eschewing exchange operation may have the option to do so down the road.”
Pennsylvania and other states that have decided to let the federal government run the exchanges may reconsider that decision in the future if the uncertainty and ambiguity gets resolved.
In the meantime, the health-care law moves forward and employers must consider their options.
“With any employer, they like predictability in any business plan, and a lot of this law has a lot of unpredictability,” says Sam Denisco, vice president of government affairs for the Pennsylvania Chamber of Business and Industry (PCBI), Harrisburg. “It’s yet to be determined whether this exchange and the product that’s offered in the exchange will offer a lower-cost product to a business and its employees.”
What is clear is that people and businesses may be penalized for not purchasing health insurance.
“It’s all about getting insurance,” says Denisco. “We need how to know how to get folks affordable insurance that’s accessible and affordable. I don’t know if that’s going to hit the mark. That’s yet to be seen.”
As costs and other factors remain uncertain, PCBI supports Corbett’s
decision to forego establishing a state-based exchange.
“We think the governor made a responsible decision for the sake of the commonwealth because there are no hard answers as to what this will cost, what the exchange will cost the commonwealth in future years,” says Denisco. “The governor doesn’t want to strap our general fund budget, which is currently strapped year in and year out, and the strain that a state-based health-care exchange would have on the state in the years when the federal money dries up.
“Since the governor didn’t have those answers clarified, I think he made the responsible decision that will move the commonwealth forward in a positive way and in compliance with the health care law.”
For ongoing updates on the Affordable Care Act visit www.insurance.pa.gov and click on Affordable Care Act News.

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