A variety of pressing economic and health issues were addressed at the National Association of Governors (NGA) annual 2011 meeting held in Salt Lake City, including elements of the Patient Protection and Affordable Care Act (PPACA) as well as state budgets. 

Hearing on Exchanges

Among other issues, NGA hosted a panel session on July 16 entitled, “Health Insurance Exchange Implementation.”[1] “The Affordable Care Act requires the establishment of one or two health insurance exchanges in each state and territory that are ready to enroll individuals in health plans by October 2013 for coverage effective January 1, 2014,” said Wisconsin Gov. Scott Walker, chair of NGA’s Health and Human Services Committee. “The release of new federal regulations this week makes this a very timely topic. Governors need more information so they can make the best decisions for their states.”[2]

Among other speakers, Steven Larsen, director, Office of Oversight, Office of Consumer Information and Insurance Oversight, Department of Health and Human Services (HHS), provided an overview of the Proposed Exchange Rule issued by the U.S. Department of Health and Human Services earlier this month.

Emphasizing that PPACA gives the states the authority to implement exchanges and flexibility on many particulars, Mr. Larsen outlined three different options to make exchanges operational and/or get federally certified:

• Fully-integrated state-based exchanged in operation by January 1, 2014;
• Hybrid model where a state and the federal government share exchange functions (e.g., a state could certify health plans; federal government oversee eligibility).
• Federally facilitated exchange.[3]

State Budgets, State Rights

However, state budgets and economic growth appear to be top priorities for many governors.   This sentiment was expressed by the Honorable Michael O. Leavitt during the exchange hearing when he noted in his opening remarks that “health reform is now economic reform…there is great connection between the debt reduction strategy, the ceiling and health reform.”  Currently chairman at Leavitt Partners, Hon. Leavitt is a past HHS secretary and former governor of Utah.  While he acknowledges that “exchanges” are a legitimate solution, he also purports the Proposed Exchange Rule could in fact seriously constrain state flexibility.  He encourages states to take the lead where they can and not just passively follow HHS.  Furthermore, Mr. Leavitt stressed the importance of allowing states to create “private” exchanges as well as those outlined in the Proposed Exchange Rule. 

For a recent analysis of the new Proposed Exchange Rule, see BenefitMall’s Legislative Alert at http://www.benefitmall.com/Services/Large-Group.

States Thinking About Fundamental Redesigns

NGA released a statement earlier this year underscoring the pressure facing governors.  Government redesign efforts are part of virtually every aspect of state policy in 2011 as governors adjust to the “new normal in the wake of the great recession," said John Thomasian, director of the NGA Center. "Governors are focusing on consolidation, streamlining bureaucratic processes and controlling employee and pension costs, while at the same time doing as much as they can to spur job growth."[4]

Most, if not all, governors are feeling the heat as states grapple with PPACA’s mandate to expand Medicaid eligibility in an environment where the states are struggling to maintain current coverage thresholds.  During the NGA hearing, Mr. Leavitt noted that tinkering around the edges of Medicaid by cutting provider rates or other incremental adjustments will not be enough.  He encouraged policymakers to think about fundamental redesigns to ensure the ongoing financial viability of Medicaid programs around the country.

“Over the last two years, states have made significant changes, cutting spending by more than 10.7 percent – $75 billion – tapping rainy day funds, shrinking the size of government and streamlining state services,” said Washington Gov. Chris Gregoire in a recent NGA press release. “Unfortunately, more difficult decisions will have to be made over the next few years.”[5]

“Governors encourage the federal government to follow the lead of states and make the tough decisions to ensure the long-term strength of states and the country,” said Nebraska Gov. Dave Heineman.[6]

Governors have called upon the Administration and Congress to adhere to the following principles for state-federal deficit reduction:

• Federal reforms should be designed to produce savings for both the federal government and states;
• Deficit reduction should not be accomplished by merely shifting costs to states or imposing unfunded mandates;
• States should be given increased flexibility to create efficiencies and achieve results; and
• Congress should not impose maintenance of effort (MOE) provisions on states as a condition of funding.[7]

As a result of the 2010 election, over half of the states elected new governors, the largest freshman class in history. Unlike the federal government, most states have to balance their budgets according to the NGA, so the deficit discussion takes on a different perspective than within their federal counterparts. 

Stay tuned for more details as BenefitMall continues to track health care reform initiatives and other federal public policy activities that might directly or indirectly impact brokers and their clients.  Please monitor www.BenefitMall.com and www.HealthcareExchange.com for further developments.