Stuck at the Drawing Board: Legislature tries again on federal health law

Following a year of open defiance and several months of interim study, the Oklahoma Legislature now appears poised to take action on a major requirement of the new federal health care law, the Affordable Care Act.  States are required by the law to have web-based health insurance marketplaces, known as exchanges, up and running by 2014.  If Oklahoma does not act to establish an exchange during this legislative session, the federal government will take over the process and establish and maintain an exchange on the state’s behalf.

Last week, legislation to establish an exchange authored by Senate President Pro Tem Brian Bingman was introduced and passed in the Senate Health and Human Services Committee.  SB 1629 creates the ‘Health Insurance Private Marketplace Network Trust’ and broadly outlines the rudimentary functions of a new ‘marketplace network’ – or, insurance exchange.  If this bill is intended to establish an exchange that will satisfy the requirements of the health law and preempt federal intervention, it seems they’ve missed the mark.

Exchanges are meant to serve as a one-stop shop for health insurance.  State-based exchanges should feature a web portal that enables simple and standardized plan comparisons, navigators to provide expert consumer assistance, and a 24-hour hotline.  Residents should be able to purchase insurance and apply their premium tax credits to the cost of a health plan with just a few clicks of the mouse.  If a household is eligible for Medicaid, the exchange should reroute them to apply for the program.  The ‘marketplace’ outlined in SB 1629 shirks almost all of these essential exchange functions.

While the Department of Health and Human Services (HHS) has assured the states significant flexibility on implementation deadlines and regulatory interpretation, many aspects of state-run exchanges are non-negotiable.  They’re written into federal statute and not up for interpretation by either HHS or the states.   To illustrate, let’s take the National Association of Insurance Commissioners (NAIC) model exchange legislation and contrast it with Oklahoma’s proposed bill.  The NAIC model covers only the fundamentals that exchange establishment legislation must address to be compliant with federal law.  Oklahoma’s bill doesn’t address them and ignores most major requirements of the law, including all of the following:

Establishment of Exchange

• Compared to the model legislation, Oklahoma’s bill has no detail about the appointment process, powers, and responsibilities of the board of trustees that will govern the exchange.  Exchange-establishment legislation should include specific provisions for dealing with conflicts of interest on the governing board.
• The bill takes an existing program called Insure Oklahoma, which is currently housed within the Oklahoma Healthcare Authority, and transfers, “all records, personnel, assets, current and future liabilities, fund balances,” etc. over to the new entity created by this bill.  Unfortunately, SB 1629 also abolishes the existing authority and funding stream associated with Insure Oklahoma, leaving the program in poorly-specified and unfunded administrative limbo.

Duties of the Exchange

• There is no mention of or provision for the creation of a web-based insurance marketplace.  This is perhaps the most glaring omission of all.  These web portals are the essence of state-based exchanges and SB 1629 doesn’t even mention them.
• There is also no mention of procedures for certifying and rating qualified health plans that will be bought and sold under the exchange.  The exchange must devise a way to screen plans to ensure only qualified and pre-certified plans are being offered to consumers.  The qualified plans are to be given a standard rating based on the level of value they provide to the consumer to help with comparison shopping.  The bill makes no mention of Oklahoma’s procedures for rating plans sold on the exchange.  Utah’s insurance exchange, which has been touted by Oklahoma leaders, isn’t ACA compliant either because it fails to limit its exchange to qualified health plans.
• The exchange portal must be interoperable with the state’s Medicaid system, and there is no provision for that in SB 1629 either.  Consumers who log on to shop for an insurance plan and discover that they are income-eligible for Medicaid, should be electronically directed to apply for SoonerCare by the exchange.  There is no provision for that in SB 1629 either.
• There is no provision to set up the required consumer assistance functions of the exchange – navigators, a toll-free hotline, etc..

Funding

• While SB 1629 does create a revolving fund, there is no mention of how or where revenue for the fund will be generated.  Federal funds are surely a part of the equation, but the Affordable Care Act also requires that each state’s exchanges be financially self-sustaining by January 2015.  States have taken a variety of approaches to fund their exchanges, most built around a system of fees charged to carriers for participating in the marketplace.

Not only is the bill insufficient in all of the ways cataloged above, most of the provisions don’t go into effect until July 2013, a mere three months before Oklahoma’s exchange needs to open for business to beta test prior to the launch in January 2014.  It’s difficult to understand how the backers of this bill imagine that it will be used to actually create an exchange.  This bill looks dead on arrival as health insurance exchange legislation, leaving federal intervention to create an exchange consistent with the Affordable Care Act as the most likely outcome in Oklahoma.