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Public Policy Analysis & Opinion

As tea steeps in Washington, the states perk along

Preparation for the PPACA era varies by state

By Kevin P. Hennosy

As many readers know, it is common for writers to file columns with monthly magazines six weeks prior to publication. Even in relatively quiet times, this necessary lead time for production and distribution makes writing commentary on current events a—forgive the term—risky business.

For example, in mid-July, when writing a column for the September edition of Rough Notes, one could be relatively comfortable that after a game of chicken where the world economy was aimed at a cliff and raced at high speed that "grown-ups" would step in and avert disaster. Nevertheless, having watched Rebel Without A Cause several times, the awareness that unforeseen circumstances can convert an adolescent game into a mortal loss lurked in the back of my mind as I filed my column.

At the time of this writing in mid-August, the financial sectors seem to be careening past one historically negative milepost after another. Therefore, I cannot be sure what the world will be like as readers receive this edition of Rough Notes. What seems like news today might seem ludicrously inconsequential six weeks from now.

What if dystopian fiction becomes reality as the scent of tea wafts along the Potomac? What if by the time you are reading this, the National Football League (NFL) has been pushed aside for coverage of a savage new competition in Rollerball? What if a British government really did institute a policy of recruiting street thugs into the police to restore "law and order?" What if, by the time this issue of the magazine reaches readers, as part of a new austerity program McDonald's and Starbucks have introduced new products called Soylent Red, Soylent Yellow and Soylent Green? In such a brave new world, will the National Association of Insurance Commissioners (NAIC) find it necessary to form a new task force on steam boiler insurance and schedule four or five years of meetings before issuing a "white paper" crafted to say nothing?

Of course, my hope is that the financial world will have settled down by October 2011, but the 10th month of the year has been a notorious one on several occasions in U.S. financial history.

States move on health reform

Implementation of the Patient Protection and Affordable Care Act (PPACA) dominated most state insurance department agendas in the summer of 2011. The act will expand participation in the private health insurance system and enhance uniformity in benefit packages.

With regard to benefit packages, California Insurance Commissioner David Jones issued a statement praising the U.S. Health and Human Services Agency's (HHS) adoption of new guidelines requiring health insurers to provide preventive services for women.

"I applaud Federal Health and Human Services Secretary Kathleen Sebelius's decision to require health insurers to provide preventive services for women," said Commissioner Jones. "This is yet another important reform under the Affordable Care Act which will make sure that women receive needed preventive services and lower the ultimate cost of care."

The commissioner's statement noted that these services include recommendations by an Institute of Medicine (IOM) panel that called for well-woman visits, domestic violence screening, advanced screening for cervical cancer and at least one preventive health exam per year. These services would be provided without a co-payment, deductible or co-insurance to those seeking services.

Delaware Insurance Commissioner Karen Weldin Stewart welcomed an assessment by HHS, which gave the department high marks for its health insurance premiums rate review program. A letter from HHS opined:

"We applaud your efforts to provide an effective rate review program for your state's insurance consumers that meets the criteria outlined in the Affordable Care Act."

Under the provisions of the PPACA, states have until January 1, 2013, to create the foundation for their own health insurance exchanges, to be available to consumers beginning in 2014. If states do not act, HHS will provide an exchange and implement it in those jurisdictions.

Minnesota Governor Mark Dayton announced the state's reception of a $4.2 million grant to further the planning and establishment of a Minnesota-made health insurance exchange. The funding, awarded by the HHS, will be administered by the Minnesota Department of Commerce.

The grant money will assist with exchange development, technical infrastructure, and stakeholder work groups to help design an insurance exchange marketplace.

"This funding will help us to provide better health care at lower costs for all Minnesotans. We have already made good progress in designing a health exchange that will put Minnesota in the forefront of health care reform," said Governor Mark Dayton.

The Minnesota officials' statement praised the concept of an exchange, which is to provide Minnesotans the information and ability to choose their own affordable, quality health care coverage. The statement promised that "the exchange will include a Web site much like or that will allow Minnesotans to easily compare health care coverage options based on cost, quality, and consumer satisfaction."

When complete, the exchange will provide consumers with a simple way to find, compare, choose, and purchase health care coverage. "An exchange will provide comparative information in an apples-to-apples format, encouraging market competition on value and empowering Minnesotans to make informed health care choices that fit their personal and family needs," said Health Insurance Exchange Director April Todd-Malmlov.

"Our state must move forward on an exchange built by Minnesotans, for Minnesotans—and this grant will help us achieve that," said Commerce Commissioner Mike Rothman. "In doing so, we will seek thoughtful, constructive public input from all parties. We need all hands on deck—consumers, employers, insurers, agents, navigators, and health care providers—to help design an exchange that addresses Minnesota's unique health care system and demonstrate again why Minnesota leads the nation in health care innovation."

Thanks, but no thanks

Not every state official shares these positive views of the market-based insurance exchanges. In the State of Kansas, the issue drove a wedge between two statewide elected officials from the Republican Party: Governor Sam Brownback and State Insurance Commissioner Sandy Praeger.

Governor Brownback rejected the HHS grant funds, which followed an example set by Oklahoma officials in April.

"There is much uncertainty surrounding the ability of the federal government to meet it's [sic] already budgeted future spending obligations. Every state should be preparing for fewer federal resources, not more. To deal with that reality Kansas needs to maintain maximum flexibility. That requires freeing Kansas from the strings attached to the Early Innovator Grant," said Governor Brownback.

"The early innovator grant does not address the most important issue in health reform, which is slowing the rate of cost growth in health care. Through the statewide Medicaid reform meetings, Kansas is taking the opportunity to decide for ourselves how best to provide health care access, improve outcomes and reduce costs for our state," said Dr. Robert Moser, Secretary for the Kansas Department of Health and Environment, a Brownback appointee.

Kansas Lt. Governor Dr. Jeff Colyer joined Governor Brownback in a statement that rejected the federal grant money.

"Federal Medicaid mandates have cost Kansans over $400 million in the past two years alone. Full implementation of the mandates in the President's health care law would cost billions more," said Dr. Colyer. "We will work to find innovative Kansas-based solutions to Kansas challenges and be very selective in the federal funds the state applies for and receives. We look forward to working with legislative leaders and Insurance Commissioner Praeger as we develop Kansas solutions."

There appears to be much work to be done if the Lt. Governor wants to mend fences with Commissioner Praeger. Commissioner Praeger, in conjunction with the Kansas Chamber of Commerce, had already initiated a series of public meetings aimed at implementing the exchange provisions of the PPACA. Following the governor's action, the commissioner canceled three public meetings that were already scheduled.

In addition to the requirements of PPACA, Washington State is implementing reforms to the health insurance system aimed at increasing informed consumer choice. Insurance Commissioner Mike Kreidler observed, "For most families, health insurance is their largest bill next to their mortgage.…In today's tough economic climate, people deserve to see where their premium dollars are going."

The commissioner announced implementation of a new law that discloses the contents of health insurance rate filings. Health insurance rate requests filed for individual and small employer (1-50 employees) health plans are now public.

According to a summary provided by the insurance department, "The new law makes most individual and small employer health insurance rate filings public shortly after they're received. This includes how much of the requested rate will be spent on:

• medical claims

• administrative costs—including executive salaries

• profit

Also, the public will see if their rate change involves any benefit changes."

Commissioner Kreidler proposed the legislation (HB 1220), which was introduced by Rep. Christine Rolfes of the 23rd District. Before the passage of that legislation, state law prevented him from sharing the information that insurers submit to justify rate requests—even after the rate was approved.

Several health insurers filed rate requests prior to the July 1 activation date of the new law but have voluntarily made their filings public. They include: Asuris Northwest Health, Kaiser Foundation Health Plan, and Regence BlueShield.

The Washington State Depart­ment of Insurance is building an interactive Web site where the public can search rate requests, post comments and sign-up to get an e-mail when their health plan files a rate change and when a decision is made. The new site is scheduled to go live early this fall.

Surplus lines

In addition to health insurance issues, states like Louisiana are working to expand affordable coverage of hard-to-place risks. In late July, Louisiana Insurance Commissioner Jim Donelon heralded the expansion of the Non-Admitted Insurance Multi-State Agreement (NIMA). The Dodd-Frank Wall Street Reform Act, cleared the way for the initiation of the NIMA.

According to a Louisiana Insurance Department news release: "NIMA is an agreement that provides a mechanism to report, collect, allocate and distribute surplus lines tax revenues consistent with the Non-Admitted and Reinsurance Reform Act (NRRA). The NRRA became part of the Dodd-Frank Wall Street Reform legislation passed in 2010 that allows only the home state to require premium tax payments for non-admitted insurance. Without this agreement, several states could potentially lose surplus lines tax revenues to the 'home state' as defined in the NRRA (Louisiana has about $25 million per year at risk)."

Three states were the founding members of NIMA with Louisiana and Connecticut being the fourth and fifth states.

"The agreement allows state authorities to work cooperatively to collect and allocate premium taxes for multi-state surplus lines insurance transactions based on the risk or exposure in each state as has been done in the past. These premium taxes provide support to the states' general funds," said Donelon.

An old framework

It is interesting to note that advancements with regard to two tough public policy issues—health care financing and surplus lines taxation—have come using a very old framework. Like the McCarran-Ferguson Act of 1945, these two issues benefit from a strong piece of federal enabling legislation to represent the public's national interest, while implementation is left to the states to guard the public's local interests.

Maybe if cooler heads prevailed, we really would not have to rely on dystopian fiction to predict our future.

The author

Kevin P. Hennosy is an insurance writer who specializes in the history and politics of insurance regulation. He began his insurance career in the regulatory compliance office of Nationwide Insurance Cos. and then served as public affairs manager for the National Association of Insurance Commissioners (NAIC). Since leaving the NAIC staff, he has written extensively on insurance regulation and testified before the NAIC as a consumer advocate.


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