The health-care law set a deadline of Jan. 1, 2013, by which federal officials must decide whether each state will be capable of getting its insurance marketplaces — also known as “exchanges” and the backbone of the new system — up and running by 2014. If a state doesn’t make the grade, the law directs the federal government to step in with its own version.
But with many Republican state leaders suing to overturn the law and governors who support it facing logistical difficulties, meeting the 2013 deadline is looking increasingly challenging.
The regulations proposed Monday address that issue by trading the club of federal intervention for the carrot of increased “flexibility.”
States that are not quite on track but at least appear likely to have their exchanges operational by 2014 could get “conditional approval” of their plans; states that have only some of the pieces in place would be able to create partnerships that draw on the federal versions of, for instance, IT systems; and states that initially cede full control to the federal government could still establish exchanges down the line.
Analysts on all sides of the debate said the move makes political and practical sense.
“States are in a heck of a pickle in terms of whether they should implement these exchanges, because there’s so much that’s still unknown: Will the health law go into effect? Will a Republican administration be the one to implement it after 2012?” said Robert Laszewski, a health policy specialist with clients across the health-care industry. “So [Obama officials] want to give as many of these states the possibility of implementing once the unknowns become known.”
Administration officials denied any concerns over the pace of state preparations. They noted that 10 states have enacted legislation to set up exchanges, six others are moving forward without new laws, and the ranks of these early adopters include Republican-led states.
Instead, in a rebuff to critics who say the law imposes a one-size-fits-all approach, the officials said the new rules are part of a larger effort to craft regulations in a way that will give states maximum leeway.
Other examples proposed Monday: Although the law requires insurance plans on the exchanges to offer an “adequate” network of doctors and other providers, the administration would leave it to states to define that term. States would also decide whether to let in every plan that meets minimum standards or to limit participation to those with the highest quality or value.
(Less pleasing to proponents of greater state power: the law’s mandate that plans sold on the exchanges cover a package of minimum essential health benefits. But the rules detailing what those benefits will include won’t be issued until later this year.)
“Flexibility is the name of this game,” Donald Berwick, administrator of the Centers for Medicare and Medicaid Services, told reporters on a conference call, in what seemed at least the 20th repetition of that word by an administration official Monday.
The other phrase of the day was “small business.”
In keeping with the Obama administration’s determination to keep its message on jobs, Health and Human Services Secretary Kathleen Sebelius broke with the usual practice of unveiling new regulations at her agency’s bland — if pleasantly air-conditioned — building.
Instead, she and other officials braved 90-plus-degree heat outside Frager’s Hardware, a Capitol Hill store whose general manager, Nick Kaplanis, would be among the many small-business proprietors who would benefit from the exchanges, Sebelius said.
Officials say that the exchanges will level the playing field for individuals and small businesses by consolidating their purchasing power, making it easier for them to comparison-shop among a larger field of competing plans and ensuring that all available options meet minimum standards.
“This means small companies will spend less time worrying about insurance and more time doing what they do best, which is investing in their businesses and creating jobs,” Sebelius said as Kaplanis nodded approvingly.
The law offers tax credits to offset the cost of insurance for the smallest businesses — those with 25 or fewer employees. But states will be able to set the size of small businesses that can buy insurance through the exchange at anywhere from 50 to 100 employees through 2016. And they can open the exchanges to larger companies after that.
The new rules will leave it to states to determine whether employers must offer their workers multiple types of plans from the exchanges rather than picking one for them.
The other principal customers of the exchanges will be Americans whose income is too high to qualify for Medicaid and who do not receive insurance through an employer — many of whom will be eligible for federal subsidies.
The rules announced Monday largely skirted controversy. Insurance groups were pleased at the extent to which discretion was left to states, and consumer advocates were heartened by provisions prohibiting that a majority of the membership of an exchange’s governing board be made up of insurance industry representatives.
But the administration must still issue regulations on a host of questions that could prove more contentious, including not just the health benefits that plans must cover, but also the system for ongoing federal oversight of state-run exchanges.