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Building a better health insurance exchange

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A prototype for Minnesota’s health insurance exchange. It’s no exaggeration to describe the health insurance exchanges as the health reform law’s backbone: For the 32 million Americans expected to gain health insurance, these state-based, marketplaces will likely be their first point of contact with the Affordable Care Act.

At their best, the exchanges could be an Expedia for health insurance, where consumers and small businesses easily compare and purchase insurance coverage. At their worst, exchanges could be like the Web sites we often associate with government services: Clunky and difficult to navigate. Ever visited anything on a Senate.gov domain?

For health reform’s coverage expansion to be successful, the White House needs the health insurance exchanges to look a lot more like the former: It needs 50 states with health insurance Expedias. And, in final standards for the exchanges published today, that’s pretty much the approach it encourages.

The White House does give states some flexibility in setting standards for their marketplaces. They get to decide who runs the new market and which insurance companies get to participate. They can outsource some functions that they don’t have capabilities for to the federal government.

At the end of the day though, it’s the White House that will determine if a state’s health insurance exchange is up to snuff. The new marketplaces will launch on Jan. 1, 2014. But a year prior, in 2013, Health and Human Services will certify which exchanges are - and aren’t - able to deliver the customer experience that the White House wants to see. That includes things like allowing consumers to easily compare plans and having an enrollment mechanism for both private insurance and Medicaid. States will have to summarize these developments next year in what the administration has now dubbed an “Exchange blueprint” before getting the go-ahead.

If a state hasn’t made significant progress towards those benchmarks by this time next year, the federal government will come in and do the job for it. Republican governors aren’t exactly thrilled with the prospect. Health insurance has traditionally been a state-regulated market, and the federal government's involvement does not seem like a positive prospect for some.

“The regulations issued today by the Department of Health and Human Services extend the federal government’s reach into the states and will cost the states millions of dollars annually to operate,” Republican Governors Association president Bob McDonnell, Virginia’s governor, said in a statement.

But, for the Obama administration, there’s a strong interest in ensuring that the health reform law looks a lot like what the law envisions: These exchanges are the main tool for expanding insurance to millions of Americans. So in walking a tightrope between stringent standards and state flexibility, the administration has leaned slightly towards the former.

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