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Senate Hears Bill on Health Insurance Exchange

State insurers line up in opposition, saying measure would squelch competition.

A bill to create a New Jersey health insurance exchange -- an online virtual marketplace where consumers and small businesses will buy health coverage -- heads for its first hearing in the Senate today.

The legislation (S1319) isn't likely to have a smooth time of it: The state's heath insurers oppose the bill, unhappy with the amount of power it vests in the insurance exchange's governing board. They argue that the board will limit consumer choice and stifle competition. Some consumer advocates, however, argue that the board should have more power.

Meanwhile, both sides disagree on who should sit on the governing board.

The legislation "would appear to empower the board to decide what products come to market and which products don't, and we just fundamentally don't believe in that," said Ward Sanders, president of the New Jersey Association of Health Plans, whose members include the five insurance companies doing business in New Jersey.

"We think the consumers can shop based on price, based on network, based on reputation for service and so forth," Sanders said. The provisions that allow the board to evaluate products, "based on some measure of value, and then screening products for the marketplace, is just not something we can support."

But some consumer advocates maintain the measure does not go far enough. Ev Liebman, associate state director of advocacy for AARP, said the bill's language "gives the exchange the power it needs to seek the best products, based on quality and value. We think it could be strengthened a bit and be more proscriptive."

"It's not unusual at all for the state of New Jersey, in every single department, to actively negotiate with consultants, with vendors, with whoever it might be, to get good contracts," Liebman said.

"This does not strike me as very heavy handed," said Joel Cantor, director of the Rutgers Center for State Health Policy, which is helping to design the insurance exchange.

Cantor said the bill's language empowers the insurance exchange board "to certify those plans that it determines provide good value and high-quality coverage to enrollees, and the board does appear to have authority to deem a plan as not high value or high quality."

If an insurance exchange law is enacted, regulations will be written "and the board will have to come up with criteria they can objectively apply to determine quality and value; otherwise they will be in court," Cantor said. "It has to be very clear."

The bill was approved earlier this month by an Assembly committee, and if voted out of the Senate Commerce Committee today, heads to the full legislature. Last week, the Obama administration awarded $7.7 million to the state Department of Banking Insurance to move New Jersey to the next level of planning. An initial $1 million grant in 2010 funded research by Rutgers and hired consultants from KPMG, who are now analyzing the technology the state needs for such an online marketplace.

The Assembly version of the bill directs to the board "to certify those plans that it determines provide good value and offer high quality coverage to enrollees." That language was deleted from the Senate bill and language substituted that directs the board to certify plans that "offer the optimal combination of choice, value, quality and service."

Sanders said the change doesn't alter the substance of the bill -- or temper his opposition. "It still places the exchange in the role of restricting a consumer's access to otherwise lawful and compliant plans," he said. "The [Senate] amendments merely change the exchange's standard of review."

Also fueling debate is another area of contention -- who will be permitted to serve on the governing board.

The bill excludes individuals employed by health insurers and healthcare providers, and prohibits them from taking jobs in the insurance and health industry for two years after leaving the board.

Consumer advocates say this provision will close the revolving door between government and industry and avoid conflicts of interests. But insurers argue the board will be far less effective without the expertise that industry insiders would bring.

The bill creates a separate advisory board with insurance, healthcare, and consumer advocate representatives. The Senate version gives the chair of the advisory committee a non-voting seat on the eight-member insurance exchange governing board. The Assembly version has a seven-member board with no advisory board representative.

The Christie administration has not come out in favor of the proposed bill, and under the Affordable Care Act, if a state decides not to run its own exchange, the federal government will step in and do it instead.

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