The first in a long series of steps toward healthcare reform was taken yesterday, when a bill that will introduce sweeping changes to the way insurance is sold in New Jersey was voted out of an Assembly committee.
A2171 defines a health insurance exchange -- an online marketplace where individuals and small businesses will buy coverage starting in 2014, when federal healthcare regulations will make insurance mandatory for most Americans. The bill was moved over the objections of health insurers and business trade groups, but with strong support from consumer advocates.
Much of the debate at the crowded hearing, convened by Assemblyman Dr. Herb Conaway (D-Burlington), chair of the Health and Senior Services committee, focused on the type of exchange that would be implemented -- an active purchaser or an agnostic clearinghouse.
An active purchaser would, among other things, establish "minimum requirements for the selection, certification, and recertification of qualified plans [as well as] criteria and procedures for decertifying plans . . ."
In contrast, the clearinghouse model allows all insurers to compete for customers, as long as their plans meet federal reform standards.
Ev Liebman, AARP state director for advocacy, applauded the active purchaser provision but said it didn't go quite far enough. She urged that the bill “be strengthened to clearly allow [the exchange] to work on behalf of consumers and demand quality, responsiveness to consumer concerns, reasonable rates, efficient plan designs, robust provider networks, and comprehensive benefits.
Other advocates for the active purchaser option included New Jersey Policy Perspective, New Jersey Citizen Action, the Main Street Alliance, and NJPIRG.
On the other side, Ward Sanders, president of the New Jersey Association of Health Plans, whose members include New Jersey’s health insurance companies, favors the clearinghouse. He warns that an active purchaser "can choke competition, reduce consumer choice, and ultimately lead to a dysfunctional market.”
Christine Stearns, vice president of the New Jersey Business & Industry Association, testified against the active purchaser provision, saying that it could increase bureaucracy and push costs higher.
“Businesses do not offer health benefits because health insurance costs too much,” Stearns said. “If New Jersey is going to create an insurance exchange that will attract businesses back into the insurance market, it has to find a way to control costs.”
The Chamber of Commerce of Southern New Jersey and the Commerce and Industry Association of New Jersey also came down in favor of the clearinghouse.
Ultimately it was the active purchaser advocates who prevailed: the bill was approved by the committee and sent on to the full Assembly. Conaway said he expected a Senate hearing on the bill to be scheduled later this month. He added that under his legislation, the exchange would be a sort of middle-of-the-road active purchaser, not an “aggressive” regulator.
But the active vs. agnostic argument is just one of the provisions likely to fuel debate in the coming months. Legislators face a June 30 deadline to adopt exchange legislation, which will make the state eligible for millions of dollars in federal grants.
The bill also calls for the appointment of a seven-member board, whose members will include the state commissioners of insurance and human services. The other five public members can’t be employees of health insurance or healthcare companies and are barred from working in the industry for two years after leaving the board.
This provision also drew strong opposition from health insurance and business representatives, who argued the board will lose access to valuable expertise, but was endorsed by consumer advocates who contended it will avoid conflicts of interest.
In addition, A2171 directs the board to create a separate marketplace where small businesses can buy coverage for their employees, called the State Business Health Options Program (SHOP). When the exchange begins offering coverage on January 1, 2013, only companies with 2 to 50 employees will be eligible to use SHOP; that will be extended to 100 employees in 2016, and more than 100 workers in 2017.
The bill also directs the board to create a Basic Health Plan, as authorized by the federal Affordable Care Act. In 2014, ACA will increase eligibility for Medicaid from the federal poverty level to 133 percent of poverty. Establishing a Basic Health Plan will allow New Jersey to access a special pool of federal funds to provide healthcare coverage to individuals between 133 percent and 200 percent of the poverty level.
The board will play a very active role in the active purchaser paradigm. The exchange "must offer to enrollees only health benefits plans that have been certified by the board, approved for issuance or renewal by the commissioner of banking and insurance, and underwritten by a carrier.”
What's more, the board must certify, “those plans that it determines provide good value and offer high-quality coverage to enrollees.” And before an insurance carrier operating in the exchange can raise rates, it must “submit a justification to the board. . . "
ACA subsidizes low- and moderate-income families to help them buy coverage in the exchange. Those with incomes up to four times the federal poverty level will be eligible for the sliding-scale subsidies that decrease as income rises. A family of four earning up to $80,000 annually would qualify for subsidies.
Raymond Castro, senior policy analyst for New Jersey Policy Perspective, presented an estimate that in the decade that will follow the 2014 rollout of health reform, New Jersey will benefit from billions in additional federal health subsidies and new Medicaid funding. He added that the bill will benefit the state by “creating more competition among insurers, and a larger insurance pool for individuals and small businesses.” And he said consumers will benefit, because the bill “requires that only quality, comprehensive insurance plans can be offered in the exchange.”
A2171 permits health insurance carriers to offer “limited scope dental benefits” as long as the plan provides pediatric dental benefits that meet federal regulations under ACA.
The bill also creates a New Jersey Health Benefit Exchange Trust Fund, which will collect funds from health insurance carriers and be a repository for the federal grants that the state will receive to implement the exchange. To fund day-to-day operations, the bill authorizes the exchange to levy a surcharge on “all qualified health benefits plans,” and to levy an assessment on health insurance carriers doing business in New Jersey that decide not to offer coverage via the exchange.
About 1.3 million New Jerseyans are uninsured and it’s estimated that the Affordable Care Act will get more than 400,000 of them covered in 2014, through an expansion of Medicaid eligibility and through federal subsidies.
Conaway said moving the exchange bill through the committee means “We are one step closer to a world where people who need insurance will have access to it. People who are insured have a better health status; that has been proven over and over again.”
He added that once the exchange is up and running “small employers and small businesses and people who are self-employed and have been waiting for decades for relief from the high cost of insurance now will have a mechanism to achieve the insurance that they need.”
Conaway said that opponents of the bill said the opponents “are concerned about the fact that the exchange is going to evaluate what the health plans are offering to the public.” When the plans request rate increases “the exchange is going to be reviewing them and making their own evaluation.”
The exchange will also oversee the operation of the exchange marketplace in an effort to avoid “adverse selection,” a phenomenon in which those in poor health flock to purchase insurance, thus increasing the risk level of the pool and driving up costs.
He said there is nothing in the legislation that would necessarily cause the exchange to exclude a carrier, but he said opponents of the active purchaser system are concerned that its impact would drive some carriers out of the market. “There is nothing [in the bill] that says that this is going to happen. But this is the fear.”
The consumer advocacy group New Jersey Citizen Action issued a statement in support of the bill. "While there could be stronger language giving the exchange more authority to negotiate with insurers for the highest-quality, most-affordable options for consumers, the bill in its current form aims to promote fairness in the private market, and is a big improvement over what we have now.”