Tag Archive for Insurance

Surcharges to Pay for Health Insurance Exchanges

With less than two weeks left for states to announce their plans for implementing Health Insurance Exchanges (HIX), how to pay for them has become a focus of the discussion. Several Republican governors have cited high costs as a deterrent for establishing state-run exchanges, opting instead to utilize federally-run exchanges. Officials in California, however, say their state-run exchange, the country’s largest, won’t cost taxpayers anything, according to a report in MedCity News.

California’s HIX will be financed by surcharges on the billions of dollars of insurance packages sold through the exchange. The surcharges are expected to range from two to four percent. “When California formed its exchange, we said it will not now or ever be a burden on taxpayers,” Peter Lee, executive director of the California Health Benefit Exchange told MedCity News.

Federally-run exchanges, which will be established in states that decide not to set up their own exchanges, will also be paid for with surcharges on insurance purchases, capped at 3.5 percent. To encourage states to run their own exchanges, the Obama administration has awarded more than $2 billion in start-up funding and extended plan submission deadlines more than once.

States estimate annual operating costs ranging from $15 million in small states to $300 million in California. Despite initial federal assistance, all funding for exchanges must be covered by states by 2015. A key component of the Affordable Health Care Act, Health Insurance Exchanges continue to be a divisive issue at the state level.

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Health Insurance Exchanges Are the Future

Over the past two years, many Republican governors held off taking steps to create a health insurance exchange (HIX) in the hopes that Mitt Romney would win the 2012 presidential election and repeal the Affordable Care Act.

And now, some states, particularly those run by Republican governors, are faced with less time to make a big decision — though the federal government did extend the deadline for states to decide whether to establish and operate their own HIXs.

States have three options for an exchange, as dictated by the Affordable Care Act:

States can run their own exchanges, with 100 percent funding from the federal government (though states will likely face costs in updating legacy systems to integrate with the exchange system);An exchange that is state-federal partnership can be established; orStates that choose not to participate in the development of an exchange will have an exchange established and run for them by the federal government.

And it seems the third option may be what will happen in several red states.

Some governors, like Maine Gov. Paul LePage, have completely checked out of the HIX discussion, refusing to participate in any way. “I’m not lifting a finger,” LePage told Bloomberg. LePage returned a $5.8 million federal grant that would have helped his state pay for setting up a partnership exchange.

Other Republican governors that have firmly opposed participation in the program include Florida’s Rick Scott, Louisiana’s Bobby Jindal, Kansas’ Sam Brownback, Texas’ Rick Perry, South Carolina’s Nikki Haley, Georgia’s Nathan Deal, Virginia’s Robert McDonnell, Alabama’s Robert Bentley, Nebraska’s Dave Heineman and Alaska’s Sean Parnell.

While some say that not participating in establishing and operating a HIX will rob states of the opportunity to negotiate the best rates with insurers, some Republicans have argued that they are not prepared to foot a large bill for a program they do not necessarily support. Now faced with the reality of four more years of an Obama administration, other Republican governors are working with the federal government’s deadline extensions to run their own exchange.

Enrollment in health-care plans is scheduled to begin in October 2013, as all Americans are required to be enrolled in a health-care plan by Jan. 1, 2014. But with some Republican leaders dragging their feet and the federal government seemingly willing to offer states flexibility, that timeline could change.

The deadline for states was extended in response to direct requests from some states that wanted more time, according to a spokesperson from the Centers for Medicare and Medicaid. “Our preference is for each state to establish its own exchange because a state-based exchange (SBE) provides states with the most amount of flexibility,” a spokesperson said via email. “There is no one-size-fits-all approach, and an SBE allows a state to structure its exchange in its own way that works for its citizens. For example, a state with its own exchange will be able to make needed changes to enrollment and eligibility, determine how to select plans to participate and how to subsequently manage those plans directly, and how best to educate consumers about the exchange.”

The deadline extensions are a further demonstration of the federal government’s intent to allow states to participate in not only the final rules of their exchanges, but also to be active participants in the whole process, said Gartner Research Director Rick Howard. While the practical effect of the deadline extension may not be to persuade stout opponents of the program to participate, it’s a “good-faith effort” by the federal government to encourage participation, he said.

Florida, Ohio and Missouri seem to be reconsidering some level of involvement in running their own program, Howard said, and Arizona, Utah and Pennsylvania may also find a way to meet the new deadlines. “I think that those governors who have resisted the exchange are doing so on the idea that they’ve seen some price tags that seem to be pretty expensive,” Howard said, adding that Republican governors may just be managing risk conservatively, and many of those now opposed to state-based exchanges may adopt an exchange once real-world models have been developed and demonstrated by other states.

Ultimately, Howard said, exchanges are the future, no matter who is in the White House. “You can wish away the Affordable Care Act, but that’s not going to change the underlying dynamics of the marketplace,” he said. “We’re seeing through merger and acquisitions activities that that’s being borne out. Health plans are looking to survive in a much more consumer-oriented marketplace that they just haven’t had to face before.”

Commercial health care was already headed toward a side-by-side comparison model because the advancement of technology has led consumers to expect more options while shopping, he said, and the Obama administration is trying to bring government up to speed with the marketplace.

Image from Shutterstock

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Health Insurance Exchange Deadline Extended

Today was supposed to be the deadline for states to tell the federal government whether they’d be building their own health insurance exchanges. But at the request of Republican governors, according to The New York Times, the Obama administration has extended the deadline nearly one month — to Dec. 14, 2012.

In a letter addressed to Virginia Gov. Robert McDonnell and Louisiana Gov. Bobby Jindal, who asked President Obama to move the deadline on behalf of the Republican Governors Association, Health and Human Services Secretary Kathleen Sebelius wrote, “We’re confident Governors will have enough time to decide whether they want to establish an Exchange, work in partnership with the federal government or have a federally-facilitated Exchange in their state.”

After states submit their applications to the federal government saying whether they want to run their own exchanges, Sebelius will have until Jan. 1, 2013 to decide which are capable of doing so, according to The Times.

Starting in October 2013, people will be able to enroll in health plans for coverage starting Jan. 1, 2014, which is when most Americans must have health insurance.

Photo of HHS Secretary Kathleen Sebelius courtesy of The White House.

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Eight States Awarded Health Insurance Exchange Grants

Eight states received funding to offer citizens and small businesses access to health insurance exchanges, the U.S. Department of Health and Human Services (HHS) announced Aug. 23. California, Hawaii, Iowa and New York were awarded Level One Exchange Establishment grants, which provide one year of funding to states that are in the starting stages of building an exchange. Connecticut, Maryland, Nevada and Vermont received Level Two grants, which are multiyear grants provided to states further along in the process of building an exchange.

Health insurance exchanges, which are one-stop marketplaces for comparing and selecting health insurance, are being created to support President Barack Obama’s recent law that requires every citizen to have health insurance. According to the HHS, access to these exchanges will be available in 2014, will provide access to “high-quality, affordable health insurance” and will provide citizens with “the same kinds of insurance choices as members of Congress.”

“We continue to support states as they move forward building an exchange that works for them,” HHS Secretary Kathleen Sebelius said. “Thanks to the health-care law, Americans will have more health insurance choices and the ability to compare insurance plans.”

A detailed breakdown of each grant and what each state plans to do with its exchange funding is available on Healthcare.gov.

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Hacking of Utah Health Insurance Exchange Raises Security Questions

With the news that the Utah health exchange — one of just two state-run online insurance marketplaces in operation — was recently hacked, states planning their own exchanges as prompted by the Affordable Care Act (ACA) might want to take a closer look at how they’ll handle cybersecurity.

The exchanges will hold digital records of a potential minefield of personal information — Social Security numbers, federal tax and income data and more. To gain approval from the U.S. Department of Health and Human Services (HHS) for their exchange, states must prove they meet five provisions related to privacy and security.

In short, the federal guidance for applications, which are due Nov. 16, requires that states provide “adequate safeguards” to protect personal information on the exchange. States must also secure a letter of acceptance from the IRS, affirming that they’re capable of protecting federal tax information, which will be used to determine eligibility for Medicaid and tax subsidies on the exchanges.

According to the exchange rules, “Personally identifiable information should be protected with reasonable operational, administrative, technical, and physical safeguards to ensure its confidentiality, integrity, and availability and to prevent unauthorized or inappropriate access, use, or disclosure.”

States must comply with the federal Health Insurance Portability and Accountability Act (HIPAA), as well as the standards set out in the ACA, but they do have significant leeway in how they meet those parameters.

For example, Rhode Island (which is viewed as a case study for exchange planning) will require the company building the digital infrastructure for its exchange to hire a security manager. The vendors must also purchase an insurance policy that would cover up to $1 million in damages for any security failure.

California, which sent out its request for proposals for the exchange in January, is requiring its vendors to sign a confidentiality agreement. Broadly speaking, the California outline for its exchange says that its software vendors “should leverage government, industry and federally funded academic research on security, privacy and continuity of operations, with a strong link to available and emerging products and solutions.”

California is also requiring that the exchange be able to verify users’ identities with state agencies, such as the Department of Motor Vehicles, before allowing them to access confidential information. The software must also include layered firewalls and data encryption to protect the data in the exchange.

Utah officials stressed that no personal information was at risk during the hacking, which took place three weeks ago, according to the Salt Lake Tribune. Only informational pages, which outline insurance options available to consumers, were affected. State officials portrayed the breach as a “pure act of graffiti. Words were garbled, headlines were blurred.”

It wasn’t the first time that the state’s health sector had been compromised. Back in April, the state’s Medicaid database was breached, with hackers gaining access to the Social Security numbers of as many as 280,000 Utah residents. Less sensitive information, such as names and birth dates, for about 500,000 others was also exposed, according to the Tribune.

With an increasing push to digitize medical information, data breaches are one of the risks. As Kaiser Health News reported in June, HHS has received more than 22,000 complaints about privacy violations since HIPAA was enacted in 2003. Some of the largest breaches (which usually involve private health-care providers) compromised the information of millions of individuals.

“Strong privacy and security rules are crucial to the success of the new health insurance exchanges,” wrote Kate Black of the Center for Democracy and Technology, a nonprofit that advocates for Internet freedom. “If adequate privacy rules and security safeguards do not protect the information collected by exchanges, individuals will not have sufficient trust in an exchange to take advantage of its benefits.”

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