New Jersey Should Approach Health Insurance Exchanges Cautiously

Poonam Alaigh MD, MSHCPM, FACP
Board of Directors, Former Commissioner of the Department of Health and Senior Services

We, in the state of New Jersey under the leadership of Governor Christie, continue to implement provisions of health reform law as deemed appropriate to improving the health of the people of New Jersey. One such provision is creating a health insurance exchange, which is a marketplace for individuals and small businesses to buy state-approved insurance policies. The goal is for these exchanges to provide individuals and small businesses with a “one-stop shop” to find and compare affordable, quality private health insurance options. Currently the federal law requires that each state have an exchange, offering the opportunity for states to create their own, providing subsidized insurance options for individuals up to a FPL of 400%. We estimate a minimum of 500,000 New Jerseyans buying insurance through the exchange, with a potential of 150,000 people transitioning from the employer sponsored health plan coverage to the insurance exchange. The administration has been evaluating this, seeking input from community and industry stakeholders, and last month was awarded $7.67 million in Level One exchange grants from HHS. In addition, last week the legislature passed a bill that would create a health insurance exchange in the Garden State in anticipation of full implementation of the Patient Protection and Affordable Care Act with key components that include an active exchange, a governance structure and a basic health plan or “optional Medicaid expansion”.

As we decipher our current environment, it is important for us to recognize that there are some factors affecting our position and decision in the state. Firstly, our state already has two “mini-exchanges”- the Individual Health Coverage Program Board and the Small Employer Health Benefits Program Board. Both are “in but not of” the Department of Banking and Insurance. We will have to develop rules that will help the integration and interaction of these exchanges with the state-wide exchange. Secondly, creating a new system to administer the federal requirement will be costly and time-consuming, so we will have to identify ways to make the process effective and efficient. Although the federal government will pay for exchange start up, state exchanges will have to fund their own administrative costs starting in 2015. Our state is still working with actuaries to estimate the cost, but Rhode Island received the first Level Two Exchange Establishment grant in November 2011, of $58.5 million to fund the development, design, and technology procurement of the Exchange through December 2014. Another aspect to consider is whether the state should set up a ‘passive’ exchange, which simply acts as a clearinghouse, or an ‘active’ one that would allow the exchange to be the purchaser and negotiate its rates. While we assess this, it is important to recognize that the active approach will require significant resource allocation, and the possibility of duplication and redundancy of governmental and regulatory functions. Finally, The United States Supreme Court will later this month, consider a lawsuit challenging the federal law that requires the mandate with a decision widely expected to be issued by the end of June.

The clock on that deadline is not as close to midnight as initially interpreted to avoid a federally operated health insurance exchange in our state. With all these confounding variables in this current environment, the Governor should approach the next steps in creating the state health exchange carefully. Most importantly, waiting to see the U.S. Supreme Court ruling in June, before seeking the additional grants that New Jersey will continue to be eligible for until the end of 2014. If the lawsuit to overturn the PPACA is successful, then the governor’s administration would have wasted valuable resources building a program that will not be put into place.

As a physician, previous health insurance executive and the former commissioner of health, I know that our collective goal remains to ensure access to high quality healthcare to all New Jerseyans. The state including the policy makers, legislators and the Governor should carefully assess and evaluate all these factors before intuitively reacting and embarking on an effort that may be futile. While waiting for the Supreme Court decision, we should continue our due diligence on creating the best state operated health insurance exchange for our state, which is void of bureaucracy, administrative duplication and red tape. Having worked personally with many of the stakeholders in this domain, I am confident that we will continue to have these healthy debates, while finally reaching consensus on the best approach for our collective New Jerseyan community.