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Insurance Exchange Arguments & Timeline

Over the last several weeks, we have had many questions from agents and members regarding the status of a health exchange for Michigan.  Provided below is  a timeline for the Exchange,  as well as definitions and brief arguments for and against the Exchange that are taking place here in Lansing.  With a joint hearing scheduled for Wednesday, July 25th, we may know more on the direction Michigan will take.  If anything comes from this meeting of the House Health Policy and House Appropriations Subcommittee on the Department of Licensing and Regulatory Affairs (LARA), we will report that tomorrow.  

Starting with a very brief review of the arguments for and against the Exchange:

Argument for the Exchange:  
  • Unless or until something changes in federal law, the Patient Protection and Affordable Care Act (ACA) is the law of the land and the ACA requires each state to establish an American Health Benefits Exchange for individuals and families and a Small Business Health Options Program.  The ACA  offers several grants available to the states to develop the Exchanges; these grants, worth roughly $9 million, require that legislation be passed and signed into law by Governor Snyder before the money can be accepted.  Delaying legislative action puts Michigan “behind the eight ball” in the software development and linkages to various legacy information systems and could result in the U.S. Department of Health and Human Services establishing and operating the Exchange here in Michigan.  
Argument against the Exchange:
  • The first argument is one of control over the Exchange and Medicaid.  According to the Patient Protection and Affordable Care Act (PPACA), all state health insurance exchanges must be approved by the federal government, and the federal government, not the state, will have authority and oversight over the exchanges. The law gives the federal government full authority to commandeer any exchange that does not meet all federal requirements.  Second, if Mitt Romney defeats Barak Obama in this fall’s election and Republicans take control of the U.S. Senate, the ACA could be overturned.  Mitt Romney has vowed to throw it out soon after taking office and because the Supreme Court has ruled the individual mandate as a tax, a simple majority in the Senate is all that is required to pass legislation overturning the ACA.  
In addition to the option of Michigan developing our own American Health Benefits Exchange and the Small Business Health Options Program, there are a couple of other options that State legislature could decide upon.  The first is a hybrid of sorts called a State Partnership Exchange where Michigan could manage the health plans on the Exchange and the federal government could manage, for example, the Medicaid eligibility and subsidies of the Exchange.  A second option is that Michigan could simply refuse to cooperate and turn all functions of the Exchange over to the U.S. Department of Health and Human Services and let HHS develop and manage a Federally-Facilitated Exchange. 

SBAM believes both of these final two options would be a mistake and that Michigan should take control of our own destiny when it comes to issues of the Exchange.

With all that being said, here is a basic timeline for the Exchange from now until January 1, 2014 as defined by the ACA and the U.S. Department of Health and Human Services:

September 30, 2012
 – Michigan must define “essential benefits”.  HHS kicked this responsibility to the states and requires that each state define “essential benefits”, or the minimum benefits, that must be offered by plans on the Exchange.

November 16, 2012 – This is the current “drop dead” date for Michigan to decide on the type of Exchange (do it ourselves or go into partnership with the federal government) and submit application to HHS.

January 1, 2013 – Date that HHS will approve or deny applications for state based Exchange or State/Federal “hybrid” Exchange.  If application is denied, HHS will begin implementation of a Federally-Facilitated Exchange.

First Quarter 2013 - While HHS has not yet provided a firm date, it is expected that Exchanges will issue applications for insurance carriers to offer qualified plans on the Exchange.

Summer 2013 – Exchange will approve qualified plans and rates of insurance carriers.

October 2013 – Open enrollment on Exchange for January 1, 2014 plan effective dates.

January 1, 2014 – Insurance plans purchased via the Exchange become effective.  This also assumes that the Exchange not only conducts the business of accepting applications and determining subsidies, but that it can also communicate with carriers regarding enrollment, eligibility, billing information, etc.

As you can see, there is a lot that goes into the decision facing the Michigan legislature and much work that must be done if Michigan is going to move forward with a state based and operated Exchange.  As the conversation continues, SBAM will stand by our Core Principles regarding the Exchange, including:

  • The Exchange must operate as a Market Organizer
  • The Risk Pools for individuals and small groups must be kept separate
  • The agent distribution channel must be preserved
  • The Exchange must operate at arm’s length from government via an independent public authority or non-profit
  • The Exchange must be efficient and not add to the cost of insurance purchased on or off the Exchange
When the legislature returns and allows for testimony, SBAM will, of course, always represent the best interest of the small business community and work along side of the Michigan Association of Health Underwriters to ensure the best outcome possible.  We will also report to you where things stand. For more information, please visit sbam.org/healthcarereform 
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