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Countdown to NJ's Health Insurance Exchange

The state has six months to iron out the details of its insurance exchange -- and qualify for $5 million in federal grants.

2012 is the year that the first major components of the federal Affordable Care Act will be put in place nationwide. The top priority, at least in New Jersey, is to develop a health insurance exchange -- a virtual marketplace that will let individuals and small businesses comparison shop for coverage.

Trenton needs to get the job done by June 30, which is the deadline to apply for an estimated $5 million in long-term federal grants to actually implement the government-mandated insurance exchange.

Health insurance exchanges are a key part of federal healthcare reform. Supporters believe that if exchanges are done right, they could broaden health insurance choices and simplify the decision-making process. Some advocates argue that online insurance exchanges can reduce the cost of health coverage, though that point is definitely in contention.

In 2010, New Jersey received an initial $1 million federal grant that has funded an extensive planning process directed by the state Department of Banking and Insurance. The Rutgers Center for State Health Policy (RCSHP) was commissioned by DOBI to evaluate various policy options the state must address as it designs an exchange, and to convene forums of stakeholders -- healthcare providers, insurance companies and brokers, consumer advocates, and business groups -- to gather their views on what the exchange should look like.

The center, led by director Joel Cantor, has held more than a dozen stakeholder forums over the past few months. Those gatherings have resulted in at least one key point of agreement: New Jersey should create and run its own exchange. If it doesn't, the federal government will step in and run the exchange for the state.

"Failure to plan," said Marshall McKnight, spokesman for the DOBI, "means ending up with a federal exchange by default. By planning, we're keeping New Jersey's options open." Some close to the process also believe that a state-run exchange will simpler for individuals and small businesses to use.

At the same time, RCSHP has identified major points of disagreement among key stakeholders. Consumer advocates, including New Jersey Citizen Action, want the exchange to be an "active purchaser" that negotiates with health insurers to bring down the cost of coverage. Said Jeff Brown, Citizen Action healthcare campaign coordinator, "We want the board [that governs the exchange] to be able to actively negotiate with insurance companies for the best prices for consumers."

But health insurers and brokers want the exchange to be an open clearinghouse, where health plans market policies and compete for customers. Ward Sanders, president of the New Jersey Association of Health Plans, said any health plan licensed in New Jersey ought to be free to sell policies on the exchange, and let the marketplace determine pricing.

"The vast majority of the healthcare premium dollar goes to provide healthcare, and there is nothing about the exchange that is going to change that." He said health plans already use their leverage to negotiate rates with hospitals, doctors, and other care providers, and if the exchange steps into the marketplace as an active purchaser, plans that can't meet its pricing targets might be shut out of this new marketplace. "And if you are a plan that gets shut out of the exchange, you have to wonder why you're doing business in the state," Sanders said.

That sentiment is seconded by Larry Altman, vice president, Office of Healthcare Reform at the state's largest health insurer, Horizon Blue Cross Blue Shield of New Jersey.

"Exchanges will work best if they promote competition, consumer choice, and transparency," Altman said. "It is also important that the exchanges treat all competitors equally. Creating a level playing field will ensure that consumers have a range of choices, while still having the security that all the products are actuarially and financially sound."

Altman indicated that Horizon is gearing up to serve the tens of thousands of new health insurance shoppers who will be drawn into the market by the ACA. "We are preparing to ensure that consumers, including many who are currently uninsured, have a positive experience and have the information and tools they need to make informed decisions."

Another key issue for the legislature: should the board that governs the exchange include stakeholders, such as health insurers, healthcare providers, and consumer advocates? Here again, Trenton has sharply differing views to sort out: insurers want stakeholders on the governing board, while consumer advocates want board members with no current ties to the health industry.

"We want to make sure that board is composed of independent experts who are free from conflicts of interest," Brown said. Citizen Action wants to see a separate advisory board that will enable stakeholders to provide input to the governing board.

Another issue that Rutgers is wrestling with is whether New Jersey should have one exchange that sells policies to both small employers and individuals, or whether those markets should be separate. It also is considering the pros and cons of establishing a Basic Health Plan to ease the transition for individuals moving between Medicaid and commercial health plans.

On November 15, the center convened a wrap-up session addressed by Seton Hall Law School professor John Jacobi, who wrote a research paper on how the exchange should be governed, a project conducted with the RCSHP and funded by a grant from the Robert Wood Johnson Foundation. Jacobi proposed that the exchange be a quasi-independent arm of the state that would be "in, but not of" a department of state government.

Trenton is moving forward to implement the ACA -- although progress has been in fits and starts. In 2010 the Assembly passed an exchange authorization bill sponsored by Assembly Health Committee Chairman Herb Conaway (D-Burlington). That bill hasn't come before the Senate for a vote and legislative sources expect the process to start over when the new legislature takes office later this month.

State Sen. Joseph F. Vitale (D-Middlesex), incoming chair of the Senate health committee, said "It is my intent after the first of the year to sit down with DOBI and talk about what they are designing and what we have in mind. We have to have a meeting of the minds on this; this has to be done legislatively." Vitale said that while Gov. Chris Christie is on record as not supporting the ACA, the governor has made it clear that he "will do what is right for New Jersey."

The ACA is expected to significantly reduce the ranks of the uninsured, who now number an estimated 1.1 million New Jerseyans. The RCSHP estimates that 444,000 of the state's uninsured will get covered in 2014, either by purchasing coverage on the exchange or by enrolling in Medicaid. Excluding the elderly, who are covered by Medicare, the RCSHP estimates that the ACA will reduce the percentage of uninsured New Jerseyans from 14.5 percent to 8.6 percent.

The state's Medicaid rolls will grow significantly in 2014, when the ACA broadens Medicaid eligibility nationwide to 138 percent of the federal poverty level. According to the RCSHP, an additional 234,0000 New Jerseyans will join Medicaid in 2014; currently more than 1 million residents are covered by the program.

The RCSHP projects that New Jersey will still have 684,000 uninsured adults in 2014, of whom about 40 percent will be undocumented immigrants.

To ensure that insurance coverage is affordable, subsidies will be provided on a sliding scale based on income, up to four times the federal poverty level. That means that for a family of four, subsidies would be available up to a householder income level of about $88,000 a year. Cantor estimated that 320,000 New Jerseyans will be eligible for subsidies to help them afford to buy coverage from the exchange in 2014.

New Jersey has some of the highest health insurance rates in the nation. Cantor said a standard policy purchased today in the state's individual market can easily cost a 50-year-old single person more than $500 a month.

Regardless of all the work going on in Trenton, national legal and political forces threaten to derail the ACA. The U.S. Supreme Court is expected to rule by June on the constitutionality of the law's "individual mandate," which requires most Americans to either get health coverage or pay a fine.

If the court overturns all or part of the law, its implementation could be aborted. The March 2010 enactment of the ACA was the centerpiece of President Barack Obama's domestic agenda -- and if he loses the 2012 presidential election, his successor might lead a movement to repeal the ACA or to thwart its continued rollout.

But the state has no real alternative but to forge ahead.

McKnight explained that New Jersey will need a robust information technology infrastructure, so insurance companies will be able to sell policies online via the exchange. DOBI has a consulting contract with KPMG LLC "to perform a gap analysis of our current state IT and operational capabilities and those required to run an exchange," McKnight said.

June 30 is only the first critical deadline the state must meet. The next, said McKnight, is January 1, 2013, when the federal Department of Health and Human Services "will decide if we have sufficient planning and resources in place." If the answer is in the affirmative, open enrollment will begin October 2013 and the program should be fully up and running on January 1, 2014.

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