Maryland readies its health care exchange, but will market be there?

 

By Donald C. Fry

Maryland took a bold step when it decided to become what the federal government classifies as an “early innovator” in setting up its own health care benefit exchange to offer health insurance to individuals and small companies under the Affordable Care Act.

Few will dispute the fact that those who have built the Maryland exchange have done a credible, difficult and far-from-completed job with a noble goal. But like any entrepreneurial venture, choosing to set up a state exchange has its risks and rewards.

One reward is federal funding. As an early innovator, Maryland got early money from the federal government. In 2011, seven states got early innovator grants to pioneer the development of IT infrastructure to support the exchange operations.

The idea was those states would share what they learned with other later adopters. The downside was that setting up the infrastructure was incredibly difficult. Three states returned the money and withdrew from the program. Maryland soldiered on.

Maryland’s reward was progressing from the planning grant stage to a second funding round known as the establishment grant. These are huge federal grants to support the development and implementation of the exchanges. They are awarded on a rolling basis. Maryland qualified for $27.2 million in Level One grants and moved on to be awarded a Level Two grant of $123 million, for a total of $150.2 million in federal funds.

One would think with such strong federal support, states would be lining up to set up their exchanges and draw down the federal dollars. However, only 16 states and the District of Columbia have moved forward to set up their own exchanges.

Seven have formed a partnership with the federal government, meaning the federal government assumes the responsibility to market and run the exchange while the state regulates it. The remaining states have all defaulted to the federally-run Health Insurance Marketplace.

The risk those states experienced was related to the complexity of setting up an exchange that could work and work well, and the deadline for sustainability. After 2015, states must assume the cost of running their own exchanges. The federal government has predicted exchanges will be self sustaining by that time. If Maryland’s exchange is self supporting, that will be a tremendous reward.

But the sands are shifting underneath the Affordable Care Act. Most recently, the Obama administration decided to delay implementing the mandate that large employers provide health insurance. Some see this as the administration backing away from full implementation due to both time and financial constraints. The working marketplaces must be open for enrollment in all 50 states by October 1. Yet recently, a health care reform expert told a Congressional oversight panel the administration “is in triage mode. Seriously, they do not have the resources to implement all of the provisions on time.”

Nationally political opposition to the plan from Republicans remains strong with efforts still afoot to stifle funding. That is a risk. Opposition in Maryland is minimal and the state exchange has indicated it will be ready on October 1, when open enrollment for families and individuals will be offered. Enrollment for small businesses in the state will begin on January 1, 2014, according to the Maryland exchange’s Web site.

Finally, there are both risks and rewards inherent in the insurance pool. The theory behind the Affordable Care Act is that by expanding the pool of insured, drawing a large cadre of now-uninsured-but-healthy young adults, the marketplace will then be able to provide health care for those who are not healthy and, in many cases, less affluent.

The reward here is obvious, health care for all who need it. The risk is young healthy adults will choose not to enter the marketplace, preferring to take their chances and/or to pay the penalties for not purchasing health care insurance.

During the Supreme Court argument on the Affordable Care Act, Justice Samuel Alito said young, healthy adults right now spend about $854 a year on health care. Purchasing health insurance under the Affordable Care Act would cost more than $5,800. One can see the choice to opt out is more than tempting.

This is the state of play facing Maryland’s exchange and exchanges across the country. There is no denying Maryland has done all it can in this arena to be both compassionate and forward thinking.

Whether it’s enough is a question the market will answer beginning in October.

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