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National health care reform carries threat of bureaucracy

| Thursday, Aug. 4, 2011

Virtual stores where people and small businesses can shop for health insurance plans were a key provision of the national health care reforms passed last year.

Where Pennsylvania's shop will be built, and who will stock and run it have yet to be determined by state officials, including legislators, Insurance Commissioner Michael Consedine and Gov. Tom Corbett's administration.

In fact, leaders have not even decided if they want the hassle of a big new bureaucracy that could cost tens of millions of dollars a year to operate. They could just do nothing and let the federal government step in, Consedine said.

"That's certainly one of the options that we're looking at," Consedine told the Tribune-Review. "More than a few states across the country have indicated they're not going to have a state-based exchange. ... Creating a new bureaucracy carries with it a fairly significant price tag."

The Governor's Office of Health Care Reform estimated that 1.3 million to 2.1 million people in the state will purchase health insurance through an exchange. And by adding a 1 percent assessment to insurance plans sold through the exchange, it could generate between $45 million and $75 million a year for oversight.

All options are on the table as Consedine and his department prepare to host a series of public forums to collect opinions from across the state on the form and function of an exchange. One of the three forums is scheduled for 9 a.m. Tuesday at the DoubleTree Hotel Pittsburgh/Monroeville Convention Center in Monroeville.

"It's not up to me," Consedine said. "We come into this process with everything on the table. That's why these forums are so important."

Health insurance exchanges are a vital piece of the 2010 Patient Protection and Affordable Care Act because the law requires Americans to have health coverage starting in 2014, whether they get it from their employer, the government's Medicare and Medicaid programs, or buy it themselves.

Individuals and small businesses that on their own have trouble finding affordable insurance will have greater buying power in an exchange, which should force down prices, the government says.

"Exchanges offer Americans competition, choice and clout," Health and Human Services Secretary Kathleen Sebelius said last month. "Insurance companies will compete for business on a transparent, level playing field, driving down costs; and exchanges will give individuals and small businesses the same purchasing power as big businesses and a choice of plans to fit their needs."

Eileen Anderson has some concerns about buying health insurance through an exchange. Anderson and her husband own Red Clay Tile Works, a Bellevue custom tile business. After exploring online exchanges in other states, she is worried that exchanges could make purchasing insurance time-consuming for busy business owners.

"It's not going to be like going to Amazon and buying a couple books," she said, referring to the online retailer. "There are a lot of different things to take into consideration (when buying insurance). ... There needs to be really good customer service."

Anderson's also worried that exchanges may not offer enough choices or low-cost options to meet her needs.

"I don't want to have to buy a lot of coverage we don't want," she said.

The details of how an exchange is set up is being left to the states. If states have not started setting up an exchange by next year, Health and Human Services will step in and take over, said Chiquita Brooks-Lasure, director of coverage policy for the department's office of health reform.

"Our goal is to make sure that an exchange is operating in every state," Brooks-Lasure said.

Two states operating health insurance marketplaces provide some guidance on the variety of ways in which Pennsylvania could structure its exchange, said Vince Wolf, executive vice president at Cowden Associates Inc., a Downtown benefits consulting firm.

"There's a high-regulation model like in Massachusetts," Wolf said. "Then there's the more open-market approach, like in Utah. There's different ways a state can do it."

Massachusetts tightly controls the plans available through its exchange. That oversight requires an annual budget of $30 million, which is generated through a fee on plans, according to Georgetown University study. Utah, on the other hand, does very little other than offering a place to shop. The state spent $600,000 to set up its exchange and has no annual budget, the Georgetown study found.

Massachusetts, with a population about half of Pennsylvania's, has 220,000 residents buying health insurance through its exchange. About 1.4 million people in Pennsylvania lack health insurance, according to a 2010 survey by the Centers for Disease Control. That does not include people employed by small businesses.

A variety of groups that will provide comments to the Insurance Department want the state to create its own exchange with the goal of providing lots of options and reasonable cost.

The 14,000 Pennsylvania members of the National Federation of Independent Business will advocate for an exchange that embraces private insurers, provides flexibility in plans offered and is cost-effective, said Kevin Shivers, the organization's state director.

"They don't want to see government-run health care," Shivers said. "We need a marketplace that encourages private insurance offerings."

The Consumer Health Coalition, a North Side organization, wants to make sure the exchange is easily accessible to all residents of the state, including those without a home computer and people with disabilities, Executive Director Beth Heeb said.

And the group wants the exchange to provide a range of plans that are easily compared by cost and options, Heeb said.

"We want to make sure quality plans are put in the exchange," she said.

The state's largest insurer, Downtown-based Highmark Inc., plans to lobby for a state-based exchange that is run by the Insurance Department and is free of complex regulation that could drive up costs.

"We advocate a free-market approach in which consumers and employers will continue to have insurance choices, including the choice to obtain health insurance coverage in a non-exchange environment," Highmark said in a statement to the Tribune-Review.

Insurance exchanges

Below is an estimate for the size and cost of an exchange in Pennsylvania, plus current size and costs in two other states.


Population -- 12.6 million

Uninsured -- 11.7 percent

Exchange users -- 1.3 million to 2.1 million

Exchange budget -- $45 million to $75 million a year


Population -- 6.6 million

Uninsured -- 4.4 percent

Exchange users -- 220,000

Exchange budget -- $30 million a year


Population -- 2.8 million

Uninsured -- 14.8 percent

Exchange users -- 2,200

Exchange budget -- 0 ($600,000 to set up)

Sources: Pa. Governor's Office of Health Care Reform; Georgetown University

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