Many individuals still wonder how healthcare reform will affect them personally. If the legislation remains, Health Benefit Exchanges (called HBEs or Exchanges) will be organizations with the most direct contact with many middle- and low-income consumers, as well as small business owners.
Under the current Affordable Care Act (ACA), otherwise known as “Obamacare,” exchanges are required to be fully operational in every state by Jan. 1, 2014, when the individual mandate takes effect. The exchanges need to be open for business by mid-October of 2013, to allow individuals time to sign-up for insurance before incurring tax penalties for being uninsured.
Exchanges are virtual marketplaces in which individuals and small business owners can shop for qualified health plans that meet the new federal requirements. If the legislation is not overturned, exchanges are where millions of moderate and low-income Americans will go to get premium and cost-sharing subsidies intended to make coverage more affordable. Subsidies will be available to individuals and families up to 400 percent of the federal poverty level, or $92,200 annual income for a four-person family. The exchanges must provide a user-friendly interface that offers apples-to-apples comparisons between bronze, silver, gold and platinum level plans. They must offer ways to apply for health insurance online, in person, or by phone, fax or mail.
Governor Jan Brewer, with the help of many stakeholders and experts, is currently deciding whether to implement a state-run health benefit exchange in Arizona or leave it to the federal government. Each state is required to submit a declaration letter signed by the governor by Nov. 16, 2012, to indicate whether the state will develop its own exchange.
The state- or federally-run exchanges will also offer small businesses a way to purchase insurance for their employees and to access a new small business tax credit. According to the federal government, small businesses in Arizona pay 18 percent more on average than large businesses for the same healthcare coverage. Some claim the collective bargaining power of the exchange, coupled with the tax credits, will drive down the costs of health insurance for small business owners.
Many other states across the U.S. are currently deciding whether to implement a state-run exchange or leave it to the federal government. Alaska, Texas, Florida, Maine and South Carolina are the only states that have already opted not to begin any preparations toward a state exchange. Others are at different stages in the development process, and some, like Arizona, are waiting until after the election to decide.
The Flagstaff Chamber of Commerce, including president and CEO of the Chamber, Julie Pastrick, is advocating for a state-run exchange. According to Tom Wyatt, government affairs director for the Flagstaff Chamber of Commerce and member of the Arizona Chamber Executives Committee, they have numerous reasons for advocating a state run exchange.
“There are a lot of specifics about the federal exchange plan that are not yet spelled-out, so we have to predicate our recommendations on the information we have,” said Wyatt, “but, at this time, we believe a state-based exchange will enable greater control at the state level, contain costs and better serve local consumers.”
According to Wyatt, the governor has reached out to the larger Arizona business community, and there have been several Chambers represented at the table. Wyatt said the Flagstaff Chamber is not the only one recommending the state-run option. “At the Arizona Chamber Executive’s September conference, there was overwhelming support for a state exchange,” Wyatt said.
When asked how a state- or federally-run exchange may affect small business owners, Wyatt said, “Most small business owners want to be able to provide health care to their employees in a way that’s not cost prohibitive, and they want to maintain a healthy sustainable workforce. Ideally, an exchange will help.”
Ed Gussio, owner of Benefit Logic in Flagstaff, says he’s also advocating for a state exchange, but admits there are still many unknowns about the role brokers will play in the new climate.
In some ways, brokers work like exchanges. “We go to the marketplace on behalf of individuals and businesses trying to find health insurance and help them through the process,” said Gussio. “Under the new legislation, people can still choose to come to us for products not offered through the exchange, and we hope to be a partner and to direct people to the exchange when appropriate.”
Gussio also has reasons for advocating a state-run exchange. “A local exchange seems like it could run more efficiently, leave locals more options and allow the organization to work more closely with local organizations,” he said.
He says that although he is not sure what will happen, he is preparing his business to be able to handle as many customers as possible come 2013, in preparation for the individual mandate to take effect. “There could be a lot of people needing help,” he said.
The state with the longest running exchange is Massachusetts. The Massachusetts HealthConnector program was developed before the ACA, under Governor Mitt Romney. Although many people claim Obamacare is basically a federal version of Romneycare, some, including Adam Powell, Ph.D, healthcare economist and president of Care + Provider Syndicate, disagrees. “Massachusetts is Massachusetts,” said Powell. “Exchanges may work, or not work, very differently in different states. We have a small, wealthy, highly literate population, and most of our state was already insured before the Connector existed. I once went to the park at 2 p.m. in the afternoon and spoke with mostly unemployed adults. Not a single one of them was uninsured.”
In Arizona, approximately 23 percent of adults are uninsured, and 15.9 percent of children are without health coverage. The national average for uninsured children is seven percent. In Massachusetts, only six percent of adults are uninsured.
When Flagstaff Business News spoke with Cristy Zeller, administrator for Haven Montessori School, she described a common dilemma. “We couldn’t afford to completely insure everyone,” Zeller said. “Some individuals would have cost us over $900 a month to insure, and we just don’t have that.” Instead, the charter school opted to give employees, on a scale based on experience and credentials, a set amount per month to use toward benefits. “They bring us receipts for their healthcare premiums, and we reimburse the amount agreed upon,” Zeller said.
According to Gussio, exchanges could make this type of system easier, and allow employers to offer their employees more choice and coverage for the money. Traditionally, healthcare plans have been chosen and purchased by companies for their employees. Soon, this will be replaced by defined contribution plans, in which companies will give their employees a set amount of money, and employees will use that money to buy or help pay for the insurance plan they choose. “Defined contribution plans will change things a lot for small business owners,” Gussio said. “We’re gearing up to be fluent in their use.”
According to the governor’s office, Arizona has received a $30 million planning grant to prepare an exchange. Washington just received $128 million for the first level of development. Still, some states wonder how (and whether) the exchanges will be self-sustaining, or if they will cost the state more money after the federal funds run out.
Powell says this all depends on the state. “The size of the population and amount of buy-in to the exchange will matter, since it’s based on an economy of scale,” he said. “One other issue is the average wealth of the population.”
A reason Alaska claims to have declined a state-run exchange is because of the worry that it may cost the state too much money in the long run.
“The federal government is offering a lot of money for state-run exchanges,” said Wyatt. “There are a lot of carrots, but there are also so many unknown factors.” FBN
To learn more about current and upcoming healthcare reforms, visit www.healthcare.gov.