By Paige Cunningham
For all of Virginia’s pressing issues, there’s one that can’t be put off until next year’s legislative session: ensuring that the state, and not the federal government, will run the new health insurance exchange.
“It’s the one thing we need to do as a legislature,” says Del. Patrick Hope, D-Arlington. “Put our support behind that.”
Hope is a member of the Health Reform Initiative Council—a group formed last July by Gov. Bob McDonnell to figure out the whats, wheres and hows of creating the exchange. Intended to offer affordable coverage to low-to-mid-range earners, exchanges must be up and running in every state by 2014.
While the healthcare reform carries a number of new requirements for states, businesses and individuals—perhaps most notably an individual insurance mandate that sparked a lawsuit by Attorney General Ken Cuccinelli—the exchanges are perhaps the most complex aspect, offering states lots of flexibility in how they can be conducted.
If a state opts out of running an exchange, the federal government will step up and take over. That’s not the preferred scenario by Hope and his colleagues on the health reform council, who recommended to McDonnell last month that Virginia set up its own exchange.
“I’m fairly confident that we’ll do an exchange because I don’t think anyone wants the federal government to do it,” Hope said.
If legislators approve the opt-in, the state needs to get to work right away. Hope says the exchange must be ready to go by October 2013 in order to meet the January 2014 deadline.
At that point, nearly half a million Virginians would become eligible for partially government-subsidized health insurance through the new exchange.
That’s according to the Commonwealth Institute for Fiscal Analysis, a nonprofit that’s been studying the federal healthcare reform and how it will impact states. President Michael Cassidy released on Monday a new report highlighting some of the challenges Virginia faces in setting up an exchange.
Although anyone may purchase insurance through an exchange, they’re mainly for those who can’t get insurance through their employer and who earn between 130 and 400 percent of the federal poverty level—in other words, an income of $22,000 to $88,000 for a family of four.
Depending on where they fall in that income spectrum, those earners could receive subsidies to help pay for their premiums. A family of four earning $22,000 would be expected to put 2 percent of its income toward premiums, while families at the top end of the spectrum earning $88,000 would have to pay 9.5 percent. The rest of the cost would be covered by the federal government.
The Commonwealth Institute estimates that at least 400,000 Virginians will be eligible for subsidies through the exchange—nearly half of those currently uninsured in the state. To give those future consumers a successful exchange, Cassidy says policymakers need to focus on a couple key areas.
One of the biggest questions is whether to run the exchange through an existing state agency, create a new state agency or set up an independent nonprofit. Cassidy seems to lean toward the independent nonprofit option, since it could keep the exchange sheltered from shifts in state government.
“The state needs to keep it immune from political turnover no matter what they choose,” Cassidy said.
Cassidy also urged policymakers to make sure industry groups that could directly benefit financially from the exchange aren’t are part of governing the exchange.
He offers additional considerations like making sure the exchanges don’t enroll a disproportionate number of those with higher health risks—thus causing premiums in the exchange to rise and enrollment to suffer—and offering consumer assistance programs that allow Virginians to make informed decisions.
“Like a lot of things in life, all these options have pros and cons,” Cassidy said. “What is most important is to have key principal imbedded in that structure.”
