Health Officials Move To Loosen State Requirements

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By Noam N. Levey–July 12, 2011

Washington— The Obama administration moved Monday to ease some requirements on states to help them set up new insurance exchanges in 2014, a key feature of the healthcare law the president signed last year.The state-based exchanges are intended to make buying health insurance comparable to shopping the Internet for an airline ticket or a hotel room. And by 2019, the exchanges are expected to provide insurance for an estimated 24 million Americans who don’t get their health insurance from their employer, according to the nonpartisan Congressional Budget Office.

Small employers with fewer than 100 workers also will be able to use the exchanges, which will have to offer plans with a minimum level of coverage. No plans will be able to deny coverage to people with pre-existing conditions.

The administration’s action Monday drew praise from consumer groups, including Small Business Majority, an advocacy group for small employers.

“The most important component of healthcare reform for small businesses is the creation of state health insurance exchanges. They will lower the high cost of insurance premiums and reduce the administrative costs that are so often the driving force behind skyrocketing rates for small group plans,” said Terry Gardiner, the group’s vice president of policy and strategy.

But creating the exchanges has proven a major challenge in many statehouses nationwide, some controlled by Republican lawmakers and governors openly hostile to the new healthcare law.

In a nod to this resistance, the Obama administration proposed regulations that will give states wide latitude in deciding how to regulate insurance companies that sell plans in their exchanges.

“Flexibility is the name of this game, and we are going to work very hard to meet the needs of each and every state,” said Dr. Don Berwick, head of the Centers for Medicare and Medicaid Services, which is overseeing the exchange regulations.

Under the new rules, some states may exercise relatively little control over the plans while others may place stringent requirements on insurers before allowing them to sell policies in the exchange, including controlling premiums.

The administration also proposed Monday to give states more time to set up their exchanges before the federal government would step in to do the job.

The new law requires the Department of Health and Human Services to operate an exchange in any state that does not create its own. Obama administration officials, as well as many insurers, would prefer that states run their own.

Thus far, 12 states, including California, Connecticut and Maryland, have enacted laws creating state-based insurance exchanges in 2014, according to a tally by the National Conference of State Legislatures.

Massachusetts and Utah already had exchanges before the federal law was passed.

And in Illinois, Gov. Pat Quinn, a Democrat, is deciding whether to sign a bill to develop an insurance exchange.

It is unclear whether the proposed regulations will speed development of exchanges in other states.

Louisiana Gov. Bobby Jindal, a Republican, has announced that his state will not run an exchange. And Oklahoma Gov. Mary Fallin, also a Republican, recently returned federal grant money to set up an exchange.

But insurance both industry leaders and consumer advocates said that the administration’s proposed regulations would give states the flexibility that many have been demanding.

“The regulation is a strong message to states that they are in charge,” said Karen Ignagni, who heads America’s Health Insurance Plans, the industry’s Washington-based lobbying arm.

The Obama administration is still developing other rules for the exchanges, including regulations outlining what benefits the insurance plans must cover. Administration officials said Monday that those additional regulations would probably be completed later this year.

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