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Health Insurance

States Question Interaction with Federal Government on Insurance Exchanges

In a new wrinkle that may further hamper federal efforts to achieve cheap health insurance for all U.S. citizens, the National Governors Association, in a letter to U.S. Health Secretary Kathleen Sebelius, claims that the insurance exchanges mandated by the health care reform law actually threaten the autonomous nature of the individual states.

Governors Association Seeks Clarification

The letter, dated November 2, read, in part, “The decision to implement health insurance exchanges require a number of complex policy decisions amid aggressive timelines . . .. States can only make suitable decisions if provided with complete and timely information regarding the structure of a state-federal partnership, essential health benefits, and the design of a federal exchange.”

The idea of insurance exchanges is a fundamental part of the health care package designed by the Obama administration. The terms of the law allow single states to create exchanges, to work with neighboring states, or to opt out entirely and to allow the federal government to operate an exchange within the state’s borders.

The letter from the National Governors Association cited a desire to prevent a duplication of effort in creating eligibility systems, since such eligibility has already been determined for the existing Medicaid system. Medicaid is the health insurance program for the poor that states administer with federal reimbursement.

Insurance Exchanges Intended to Create Competitive Marketplace

The health care reform law, signed in 2010, seeks to create an insurance marketplace where consumers can buy cheap health insurance at competitive rates if they are not covered as a benefit of their employment. The language of the law, however, gives the states tremendous leeway in establishing these exchanges, which is causing a large part of the confusion.

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The fate of the entire health care reform effort is a source of considerable controversy, as the courts continue to hear cases about the constitutionality of requiring every U.S. citizen to carry health coverage as all drivers are currently required to have auto insurance. (With some minor exceptions.)

Health Care Remains a Political Controversy

Since 2012 will be a presidential election year, and the full provisions of the health care law are not scheduled to be implemented until 2014, most insurance industry analysts are in agreement that a great deal can and will change over the next two years.

Many insurance companies, in anticipation of regulations that will cut into their profit base, are already raising rates and cutting coverage options, while many middle-range to small businesses are dropping health insurance for employees altogether. One of the principle criticisms of health care reform has been that in the short-term, far from creating cheap health insurance, it has actually made coverage more expensive for many Americans.

With the National Governors Council now weighing in, and raising the issue of states rights, long a controversy in American history, this situation will likely become even more muddy. More than half of the insured U.S. population derives coverage as a job benefit, but even that security has been badly shaken by 9.1 percent unemployment.

For individuals and families struggling to carry private health insurance, the best strategy is still carefully researched coverage shopping, with multiple rate quotes, and a re-thinking of their actual reason for carrying health insurance. More Americans are now trying to cover “normal” health expenses out of pocket, while allowing their coverage to exist as a protection against major medical debt. This allows them to maintain a higher deductible, and thus to keep the cheapest insurance rate possible under the current circumstances.

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By Rana

Rana K. Williamson, 48, a former university professor who is now a professional writer and researcher, focuses on cost-saving techniques and insurance news. Located in Texas, she has a particular interest in auto and motorcycle insurance because, as she explains, "When you live in a state this large, you're always behind the wheel of your car. And, well, bikes are just cool. Period." Readers contact Dr. Williamson with those questions that take a little extra digging and that relate to the latest changes in the world of insurance. "One of the most important things in managing costs in any field is to understand the basics and to stay abreast of the latest developments," said Williamson. "I enjoy using my love of research to answer questions and to track down information." Contact Dr. Williamson at info@cheapinsurance123.com with your own insurance-related and cost-managing questions.

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