State-run health care exchange would have been preferable, Conaway says

TRENTON – New Jersey is one of 26 states that chose to let the federal government put in place the health care benefit exchange.

It could have chosen to set up its own, which some Democratic lawmakers were calling for last year, or adopt a hybrid state-federal model. Instead, it’s letting the federal government do it totally.

One of the prime movers behind the health care exchange effort in New Jersey, Assemblyman Herb Conaway, believes problems being experienced at the federal level are a good reason why a state-based operation would have been preferable.

But Gov. Chris Christie made the decision citing scant information from federal officials on the exchanges as well as the potentially higher costs residents would bear if New Jersey created its own version.

“I will not ask New Jerseyans to commit today to a state-based exchange when the federal government cannot tell us what it will cost, how that cost compares to other options and how much control they will give the states over this option that comes at the cost of our state’s taxpayers,” Christie said in a statement last year.

But it appears the federally run exchanges may not be fail-safe either. It appears President Barack Obama’s administration didn’t anticipate so many states would rely almost entirely on the feds for the exchange’s implementation. It was hoping for states to do much of the grunt work through the subsidies it provided them as incentives.

On top of that more money is needed to get the exchanges up and running in due time and the Republican-led Congress, which opposes the Affordable Care Act and has voted to defund it, has yet to open the purse strings.

At a recent federal budget hearing, Secretary Kathleen Sebelius of the Department of Health and Human Services called for $1.5 billion to help put in place the federal exchanges and the hybrid programs.  

At a health care summit by the Common Sense Institute of New Jersey, one speaker, Joel White of the Coalition on Affordable Health Care, explained how the financial crunch could pose problems in implementation of the exchanges, which must be done by October. He warned many states could be left “scrambling.”

Democrats, namely Conaway and Sen. Nia Gill, had called for creating a state task force that could help keep tabs on the federal government’s operation of the exchanges. It was an alternative plan to Christie’s veto of the state-based exchange (SBE) bills both lawmakers sponsored.

They pointed out that the Affordable Care Act of 2010 enables states to create a state-based health exchange if it deems the federal government’s running of it inadequate or unsatisfactory.

Which type of the exchange is the best – state-based, federally run, or the hybrid model – remains to be seen.

Conaway, in a telephone interview, said he has also heard about the federal government taking on more than perhaps it had originally anticipated.

“With the benefit of hindsight, it may have been more appropriate to plan for the greater dependency given how much the political landscape has changed,” he said Tuesday.

The assemblyman said it was contingencies like these that would have made a state-based exchange preferable, since it would have given the state more flexibility and enabled it to tailor the exchange to its marketplace.  

“We do have a law on the books and expect it to executed,” he said. “The demands of the uninsured people will not go away. I’m still confident and look forward to the exchanges coming into being.”

One expert, Amy Lischko, an associate professor at Tufts University School of Medicine, said that some state leaders may have simply went the federally run route not only as a way to avoid being dumped on with more responsibilities. Some are privately banking on the fed’s implementation of the exchanges to be unsuccessful, which would be fine with them because they don’t exactly love the federal health insurance mandate to begin with.

“You don’t hold the risk that way,” she said in a prior interview.

 The state of Idaho, which put together a working group to analyze the three options, found pros and cons for all of them.

The group, in its white paper, said that unlike a federally operated exchange, a state exchange would likely be more accountable to its constituents, as it will be overseen by the state’s health services department.

The federally run operations have other pitfalls, according to some experts. Doug Gray, who is the executive director of the Virginia Association of Health Plans, said with a federally run exchange, you most likely would be dealing with one regulator from the federal level and not the state regulators with which there are probably existing relationships.  In an interview with Kaiser Health News, he said the federal regulator might not “be able to work with you or understand how your market works, as compared with a local regulator.”

Here in New Jersey Rutgers University’s Center for Health Policy held forums in 2011 involving various stakeholders – health insurance companies, employers, and consumers, among others. The popular opinion was state-based exchanges are the way to go.

“A near complete consensus was evident across groups that New Jersey should create its own health insurance exchange, rather than default to federal administration,” the forum’s paper said in its findings.

The Idaho working group’s study found some advantages to the federal exchanges, such as no direct exchange responsibilities and the ability to switch over to a state exchange if it chooses to.

“Delaying that decision could lead to a better and/or less expensive long term SBE solution. In other words, it may be beneficial to let the FFE and other states  ‘work out the bugs’  in their (Affordable Care Act) compliant exchange models,” the paper said.  

But it did point out some drawbacks, such as the “one size fits all” approach that the federally run exchanges are bound to have. The Coalition for Affordable Health Care warned about the risks of limited options that some federally run health exchanges may pose.

“Exchanges that limit choices through mechanisms such as selective contracting will not promote expansive choice among competing health plans,” the group said.

State-run health care exchange would have been preferable, Conaway says