According to the Affordable Care Act, Americans with incomes at or above 134 percent of the federal poverty limit who do not have employer-based health plans-as well as small businesses-will be able to use state health insurance exchanges (HIEs) to select and purchase health insurance coverage. The HIEs, together with the expansion of Medicaid to those with incomes at or below 133 percent of the federal poverty limit, are key components in the effort to extend health insurance benefits to nearly all Americans under the ACA.
According to Joel Ario, director of the Office of Insurance Exchanges in the Department of Health and Human Services, HIEs became a centerpiece of the ACA legislation because, unlike so many other elements in the Act, HIEs enjoy wide bipartisan support. Why? Because their concept and structure so easily accommodates the vision of partisans on both sides of the debate.
One vision sees HIEs as critical to opening up markets and competition in health care, while the other sees the HIEs as a means of encouraging a seamless system in which the public sector (Medicaid) and private sector (commercial health insurers) offer similar basic benefits, based on the yet-to-be-announced “essential benefits” package called for in the ACA.
Vision one: “A purchasing pool” for health insurance
Ario credits the origin of HIEs to a fellow insurance commissioner, Larry Morell. Around 2000, Morrell responded to concerns about commercial health plans by suggesting there ought to be a purchasing pool or exchange mechanism to make a broader range competitive health insurance options available.
“The feeling was, ‘why can't we create an exchange for those who don't have the advantage of getting their coverage through employment with larger companies?’” says Ario. Soon, the idea took off, encouraged by many who preferred the HIE concept to the Clinton-era concept of a single-payer system.
As governor of Massachusetts, Mitt Romney in 2006 signed Massachusetts' first-of-its-kind health reforms into law and led Republicans in “marrying the exchange concept with a personal responsibility requirement, a sense that everyone ought to participate in the system.” Implicit to this approach was the idea that a larger market and more insurer competition, based on universal participation and a defined package of minimum benefits, would deliver broad price, service, and public health benefits. “The big focus here was on inclusion, with less focus on regulation,” says Ario.
Vision two: Integrate public, private health plans
On the other side of the spectrum, the insurance exchange concept fit neatly with another group seeking an all-inclusive solution, but one that clearly integrated with Medicaid. These “integration” proponents recognized that there had to be a mechanism for insuring the 30-plus percent of Americans not covered by employer-provided health insurance, those whose incomes fell below threshold levels, or those excluded due to pre-existing conditions.
The idea here, says Ario, “was the exchange would be a way of getting the market open to everybody from zero to 400 percent of the federal poverty limit. The thought was that if you get insurance coverage open to the zero to 400 group, those making over 400 percent of poverty probably have employer-based coverage or can afford to buy it themselves.”
Proponents of this vision envision a seamless integration of employer-sponsored insurance, exchange-based insurance, and Medicaid in which “there's no wrong door” for the consumer. By establishing a single limit for Medicaid eligibility-income of zero to 133 percent of the federal poverty level, the Affordable Care Act clarifies insurance eligibility for individuals whom Ario says might “otherwise go off the cliff” by losing coverage amid the varied qualification and income requirements of state Medicaid systems. Of course, those between 134 and 400 percent of poverty who purchase their own insurance through the exchanges become eligible for a federal tax credit, which is intended to subsidize their coverage, just as an employer-based plan would.
Because the ACA is clear on the eligibility limits, Ario says it makes the insurance qualification process relatively easy. “By definition, when you have a process to establish Medicaid eligibility, you can also establish exchange eligibility, as well as eligibility for the tax credit. It's seamless.” To support the “no wrong door” approach to qualification and coverage, many are now pressuring states to move their Medicaid administration systems to newer platforms that “synch up” with the exchanges and simplify the process of getting people qualified and signed up for coverage.
Are there any wrenches in the works?
Even as the reality of near-universal insurance coverage takes shape, there are a number of factors that could complicate implementation of the Affordable Care Act. While Ario says that these won't have a direct impact on the development of health insurance exchanges, they are nonetheless cause for concern:
Major state budget problems have prompted many state governors to ask Congress for repeal of the “maintenance of effort” requirement, which states had to accept to qualify for enhanced FMAP funding under the American Reinvestment and Recovery Act of 2009. MOE requires states to maintain 2010 Medicaid eligibility levels until 2014 (when the new ACA eligibility thresholds go into effect) or lose their federal Medicaid funding match.