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The End of the Beginning: Health Reform and the States

The End of the Beginning: Health Reform and the States. Chris Whatley Washington Director The Council of State Governments. Overview Role of States Near-term Provisions Long-term Challenges Legal Concerns. The Cliff Notes Version ….

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The End of the Beginning: Health Reform and the States

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  1. The End of the Beginning: Health Reform and the States Chris Whatley Washington Director The Council of State Governments

  2. Overview • Role of States • Near-term Provisions • Long-term Challenges • Legal Concerns

  3. The Cliff Notes Version… • The purpose of the Affordable Care Act is to try to cover 32 million of the roughly 50 million uninsured by 2014 through: • Medicaid Expansion - 16 million new patients • Individual Mandate – facilitated through subsidies and the new exchanges. • Employer Inducements – Subsidies for small businesses and fines for large employers who don’t offer coverage.

  4. States are the driver… • The legislation places states at the center of a new national health care system. States will either administer, regulate, and/or pay for virtually every element of the system. Each component will require state legislation. However, states will need to await a cloud burst of rule making before they can fully determine the scope and scale of their responsibilities and set legislative priorities.

  5. Near Term Impacts… • High Risk Pools – Provided $5 billion for states to create/administer high risk pools. However, there is not enough money to cover the patient population. • Changes to State Employee Coverage - Immediately prohibits pre-existing condition restrictions for children, allows children to stay on their parents plans until age 26, limits rescissions, and bans lifetime caps, automatic enrollment in new federal long-term care insurance (2011).

  6. Near Term Impacts (continued)… • CHIP for state employees – Upon enactment children of state employees are eligible for CHIP if state contributions to coverage premiums have dipped below 1997 levels and/or premiums and cost sharing exceed 5% of family income. • Early Medicaid Expansion Option – States have the option of expanding Medicaid immediately, but at existing FMAP rates.

  7. The Long Road to 2014… States face potential costs in building out high risk pools in the short-term, creating the new insurance “exchanges” in the medium-term, and covering a significant part of the costs for a massive expansion in the Medicaid patient population over the long-term. It is too early to determine the total scope of these costs, they will be closely related to current levels of Medicaid coverage in each state.

  8. The Long Road to 2014… • Spending on state employee health insurance • Individual mandate might increase number of state employees that enroll in health insurance, therefore increasing state outlays on health insurance • Some employees will seek alternate coverage such as spouse coverage • State coverage must meet certain benefit requirements • Various fees and subsidies: • Mid to Large sized companies face penalties if an employee’s premium exceeds 9.5% of his or her income • Federal subsidies offered for use on the exchange for individuals (100%-400% FPL) not receiving insurance through employers

  9. The Exchange Dilemma… • One of the core elements of the legislation is a system of health “exchanges”, one geared to individuals and one geared to small businesses. • 2014: Businesses with fewer than 50 employees must be able to offer coverage through a government established exchange • 2016: The small businesses exchange must expand to those businesses with fewer than 100 employees • 2017: States can opt to expand exchange eligibility to all businesses regardless of size

  10. Decisions in the Exchange Dilemma… • Will it be a state-run, regionally run, of federally run exchange? Playing a direct role in the exchanges may help states preserve their role in insurance regulation and could create limited cost savings for some states. • How to design the exchanges to lower administrative fees? States can recoup all administrative fees by taxing participating plans – but fees are hard to determine and too low of a fee could lead to a deficit. Costs can differ among states (i.e. $700,000 per year for the bare bones Utah model to $30 million for the Massachusetts Connector).

  11. The Medicaid Build Out… • Roughly 40% of the uninsured population will receive coverage through a massive expansion of Medicaid. The RAND Corporation estimates that 12 million currently uninsured individuals will be added to Medicaid (a 32% increase). The CBO estimated that the expansion will cost the states $20 billion over the next ten years, but the estimate undercounts a wide range of potential state costs. Maintenance of effort requirements will also significantly limit the flexibility that states have to adjust their Medicaid programs in the face of budget deficits.

  12. Medicaid Expansion Costs 2014-2019… • AL = $247 • AK = $44 • AZ = $77 • AR = $405 • CA = $1,269 • CO = $255 • CT = $128 • DE = $15 • DC = $26 • FL = $702 • GA = $529 • HI = $13 • ID = $81 • IL = $526 • IN = $277 • IA = $108 • KS = $106 • KY = $283 • LA = $231 • ME = $50 • MD = $338 • MA = $50 • MI = $348 • MN = $179 • MS = $173 • MO = $256 • MT = $66 • NE = $70 • NV = $100 • NH = $35 • NJ = $351 • NM = $177 • NY = $316 • NC = $624 • ND = $20 • OH = $422 • OK = $253 • OR = $65 • PA = $468 • RI = $32 • SC = $264 • SD = $28 • TN = $112 • TX = $1,700 • UT = $113 • VT = $3 • VA = $330 • WA = $53 $ in Millions • WV = $118 • WI = $113 • WY = $16

  13. Insurance Regulation… The balance of power between the states and the federal government in insurance regulation will be fundamentally altered by the new legislation, with massive new requirements for detailed rate increase reviews, a virtual elimination of the underwriting process due to guaranteed issue, and national standardization of benefit packages. It is unclear how much of this will be accomplished through dialogue with legislatures and insurance commissioners or through regulatory pre-emption.

  14. Legal Implications… Most legal experts do not believe that the current legal challenges to the legislation will ultimately prevail, but they could lead to a new interpretation of federalism. September 14, 2010: Florida District Judge announces that on October 14, 2010 he will decide if states have jurisdiction to sue – lawsuit brought by 20 states October 18, 2010: Arguments will be heard in federal court in Virginia on a similar lawsuit filed by the state

  15. For further assistance contact CSG Washington Chris Whatley Washington Director Tel (202) 624-5460 Email: cwhatley@csg.org www.csg.org

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