NC Health Benefit Exchange – What’s The Rush?

The Patient Protection and Affordable Care Act or “ObamaCare” has created a growing storm of confusion regarding its authorization and implementation.  The health benefits exchange concept is one area that seems particularly convoluted and unclear.  The U.S. Department of Health and Human Services (HHS) has provided little guidance on key questions about what the exchanges should include and how they should be run.

Under ObamaCare, the states “shall” establish a health insurance exchange or if a state chooses not to provide its own exchange by January 1, 2014, the federal government, under the HHS Secretary Kathleen Sebelius, will set up an exchange for it.

The exchanges are to facilitate the purchase of “qualified” health plans.  However, the HHS Secretary has yet to define exactly what the definition of a “qualified” plan is.  Some of the vague minimum functions, all subject to the Secretary’s interpretation and regulation, include: certification of health plans as “qualified plans;” marketing rules for health plans; rating system for health plans on the basis of quality and price; provision of appropriate information to enrollees or prospective enrollees in the exchange; sufficient number of providers in addition to a network of “essential community providers” to serve low-income persons; and a standard format for the presentation of health benefit and plan options.

The HHS Secretary has broad discretion when implementing and regulating the rules and standards for the creation and operation of the exchanges.  States must follow these rules and standards and may not make rules that conflict with the federal standards.

Such exchanges will bear little resemblance to a market-based healthcare system.  Instead of individuals purchasing among a wide variety of private health plans and taking personal ownership of their coverage, an exchange will expand enrollment in public programs like Medicaid and constrict consumer health choice.

In a limited government, market-based health insurance system, there would be a large selection of various plans and products where insurers and providers are held directly accountable to patient-consumers and act accordingly to meet their demands and needs. ObamaCare would allow government sponsored health plans and “co-ops” to “compete” against private health plans.  This effect will eventually lead to restricted consumer choice with a limited number of standardized plans approved by the federal government.  States will be limited to the federally- approved health plans and may not expand to include additional consumer options.

If the limitations are allowed to their full extent, state exchanges may end in a single-payer system by excluding private insurers other than Office of Personnel Management multi-state plans.  As a Congressional Research Service report explained, an “exchange could have the ability to make a determination that any or all of the private health plans seeking certification are not in the interest of qualified individuals and employers.”  Because the law regarding the exchanges remains so unclear, the federal government will need even more regulations and red tape to determine whether the multi-state plans will be the only survivors under an ObamaCare regime.

Several solutions to the state health exchange program have been proposed.   HB 115, offered by several Republican sponsors, would set up an exchange that would put insurance industry representatives on the exchange’s commission.  A competing bill, HB 126, offered by Democrats, would have no seats for health insurers.  Yet a third concept by NC Insurance Commissioner Wayne Goodwin would create an independent expert panel to oversee NC’s exchange, four of whom would be appointed by Goodwin, with health insurers sitting on advisory committees.

However, all of these possible solutions are premature.  Before we dive into creating an exchange, we should evaluate whether North Carolina will actually need one.

Let’s start with the constitutionality of the entire ObamaCare bill.  More than half of the states have filed lawsuits challenging its constitutionality.  If the individual insurance mandate or the entire law is found unconstitutional, the health benefit exchange problem becomes moot.

Furthermore, a mandated state health exchange would infringe on states’ rights by requiring state officials to act as agents of federal health laws and regulations.  Under the U.S. Constitution, the federal government cannot order state governments to do anything; it can only influence their decisions using federal grants.  If the federal government tries to directly order a state to act, it is considered a violation of the Tenth Amendment.

If either of these arguments invalidates ObamaCare, diving into unchartered exchange territory would mean North Carolina would have spent millions of dollars interpreting what the exchange would have included and how it would have been implemented without any reason to do so.  We would have wasted state tax dollars that could have been better used elsewhere or not used at all given the state of our current budget crisis.

There is also the argument that if states do not act by 2013, the federal government will “takeover” and implement its own exchange.  This outcome seems highly unlikely.  Secretary Sebelius has already missed several deadlines required by the ObamaCare legislation.  Given the constant delays in its implementation, states have plenty of time to wait until the constitutionality of ObamaCare is determined before rushing into creating their own health exchange.

Therefore, the General Assembly should reconsider hastily creating an exchange.  Instead, it should wait and ensure an exchange is absolutely necessary.   If it is determined that North Carolina must have an exchange, legislators will then need to understand what is required under the exchange and how to make it as competitive and market-driven as possible.