Fear Of Rising Health Insurance Costs Drives Health Exchange Recommendation

Emilie Ritter Saunders / StateImpact

A working group appointed by the governor last week recommended that Idaho aim to have a state-based health insurance exchange up and running by 2014.

When Idaho Association of Commerce and Industry President Alex LaBeau made his ultimately successful motion that the Health Insurance Exchange Working Group should call for Idaho to implement a state-based exchange by 2014, he spoke in dramatic terms.

“What is in the best interest of the employers in the state of Idaho?” he asked.  “How can we mitigate this massive increase in their costs that’s coming?  The only way is to pursue a state-based exchange.”

Health insurance exchanges are a key component of the federal health care law.  Essentially, they’re marketplaces that allow consumers to evaluate and purchase health insurance. Gov. C.L. “Butch” Otter convened his 13-member working group after the U.S. Supreme Court upheld the federal Affordable Care Act earlier this year, forcing states to decide what form of exchange to pursue. 

There are reasons for states to implement their own health insurance exchanges.  A draft report from the working group outlines many of them, and they boil down to this: a state-based exchange allows Idaho to retain greater control over its health insurance market.

LaBeau says there are specific aspects of the Affordable Care Act that could drive up health insurance costs in Idaho.  For example, the health care law limits the extent to which insurers can raise premiums based on things like health status, age and gender.  LaBeau believes that could result in higher premiums for healthy people.

There’s also the issue of what the ACA terms “essential health benefits.”  Those essential health benefits are, basically, a minimum level of coverage that health insurance plans must meet.  Whatever benefit level is established as the benchmark will have implications for health insurance costs.

Late last year, the U.S. Department of Health and Human Services granted states greater-than-expected leeway to determine what the essential health benefits package will include.  Nevertheless, LaBeau believes there’s a chance Idaho could lose the ability to set that benchmark under a federally-run exchange, or under a federal-state partnership exchange.

According to Larry Levitt, a senior vice president at the Kaiser Family Foundation, both of LaBeau’s concerns are misplaced.  Yes, the limits on premium discrimination could slightly elevate costs for healthy individuals or groups.  But it should also bring down insurance costs for those who are less healthy.  In other words: it should all come out in the wash.

Moreover, Levitt says, there’s no reason to think states will not be able to establish their essential health benefits packages based on insurance plans currently offered in their state.  “What the guidance said was that if a state does not choose the essential benefit benchmark, the benchmark will still reflect what the mandated benefits are in the state,” Levitt says.

“The state decisions around creating health insurance exchanges are so colored by ideology and politics that in a lot of cases the debates are not entirely based on the facts,” he observes.  Still, Levitt says, those arguments are in some cases deployed to spur action that may well be in states’ best interest.

“When push comes to shove, I don’t think there are many states that are going to want the federal government coming in and overseeing their insurance markets,” he says.

Working group member Zelda Geyer-Sylvia, executive vice president and CEO of Blue Cross of Idaho, says that’s the high-level argument for pursuing a state-based exchange.  States still haven’t received the full rules and regulations pertaining to health insurance exchanges, she notes.  Once that guidance becomes available, it’s still subject to change.  A state-based exchange is the one that offers stakeholders the greatest influence, and therefore the greatest opportunity to control costs.

“I think we will have some control over how new products are developed in the exchange if we maintain it on the state level,” Geyer-Sylvia says.  She gives an example.  “Say I’m a family with young kids,” she says.  “I might want lower out-of-pocket cost to see my physician, and I might want a higher out-of-pocket cost for an inpatient hospital stay.”  An older person, however, might want the opposite.

Under a state-based exchange, Idaho insurers would presumably have greater leeway to develop health care products that match local demands. “How you piece those things together will be very important, and that’s the flexibility we want,” Geyer-Sylvia says.

The Department of Insurance released the working group’s findings and recommendations today.  The final decision rests with the governor.