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Health care reform opens doors to big changes and a new era

Health care reform opens doors to big changes and a new era

The biggest-ever changes to the nation's health care delivery system are about to be rolled out. Under the nation's health care reform law, millions of lower-income uninsured U.S. residents will be able to use federal premium subsidies to buy policies from commercial insurers participating in public health insurance exchanges during open enrollment periods that begin Oct. 1 Coverage will be effective Jan. 1, 2014.

“Starting in 2014, Americans in all states will have access to quality, affordable health insurance,” Department of Health and Human Services Secretary Kathleen Sebelius said in conjunction with the awarding of $1.5 billion in federal funds to help states develop their exchanges.

The exchanges also will be available, though federal subsidies will not, to higher-income uninsured individuals as well as small employers. Massachusetts and Utah already have set up state exchanges (see related stories here and here).

Seventeen states plus the District of Columbia have made commitments to the Department of Health and Human Services to set up exchanges. Other states will work with HHS through partnership agreements in which the states will assume some exchange responsibilities.

For states that decline to set up their own exchanges or enter into partnerships, the federal government will establish exchanges.

In 2014, the exchanges will issue policies to 6 million people eligible for premium subsidies, according to Congressional Budget Office estimates.

In all, about 10 million people, including those working for small employers, will receive coverage through exchanges in 2014.


By 2016, total exchange enrollment will exceed 26 million, including 18 million people using federal premium subsidies, 4 million purchasing nonsubsidized coverage and another 4 million people whose employers purchase coverage through the exchanges, the CBO projects.

The cost to the federal government will be significant. In 2016 alone, the CBO projects that the government will spend $85 billion on premium subsidies, with exchange enrollees receiving an average of $5,210 to offset the cost of coverage.

“Billions of dollars will be spent to provide coverage to the uninsured,” said Helen Darling, president of the National Business Group on Health in Washington.

The law also will affect what are known as “mini-med” health plans (see related story).

Separately, employers have found success in deploying coverage provided by private health insurance exchanges (see related story).

It is an expansion of coverage that is unprecedented in size, said Frank McArdle, an independent benefits consultant in Bethesda, Md.

While the uninsured clearly will benefit from that expansion of coverage, employers could benefit as well. To the extent that more people have coverage, health care providers will incur less uncompensated care, a cost they now pass on to those that have coverage, which drives up group health care costs and premiums.


“The vision of lawmakers was, if we have more insured, cost-shifting is alleviated,” Mr. McArdle said.

While no one knows how accurate those exchange enrollment projections will be, benefit experts say many states are moving full speed ahead to set up their exchanges.

“States have been working nonstop to get it done,” Ms. Darling said.

“Some states are in very good shape,” said Caroline Pearson, a director at health care consultant Avalere Health L.L.C. in Washington. In particular, she cites California, Connecticut and Oregon as making rapid progress in developing their exchanges.

An unknown, though, will be the ability of the federal government to set up exchanges in more than two dozen states. When Congress passed the Patient Protection and Affordable Care Act in 2010, the expectation was that nearly every state would set up an exchange, Ms. Pearson said.

“Lawmakers clearly had hoped and anticipated that states would do it — with a federal fallback,” Mr. McArdle said.

“The feds will be challenged to get it done,” Ms. Darling said.

Legal uncertainties also remain. The biggest unknown may be the outcome of a lawsuit filed last year by Oklahoma Attorney General Scott Pruitt charging that, under the health care reform law, premium subsidies are available only to those buying coverage in state insurance exchanges (see related story).


If his suit — now pending before a U.S. District Court in Muskogee, Okla. — is successful, millions of uninsured U.S. residents obtaining coverage in federal exchanges would not be eligible for the subsidies, making the coverage unaffordable, resulting in a much smaller reduction in the number of uninsured than had been projected.

But some benefit experts are skeptical that the suit will succeed.

“I personally would not put a lot of money on that lawsuit,” Mr. McArdle said.

Federal regulators clearly believe they have authority to provide premium subsidies in federal exchanges, Ms. Pearson said.

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