Virginia Pushes Ahead With Obamacare Exchange Implementation

Published December 9, 2011

The Commonwealth of Virginia is studying how to set up a health-insurance exchange, despite uncertainty about the federal law’s legal status and unclear guidance from federal officials.

After the September decision by the Fourth Circuit Court of Appeals that Virginia lacked standing to challenge President Obama’s health care law, the Governor and General Assembly decided to explore options for implementing the health insurance exchange mandated under the law. The exchange would function as an online marketplace for health insurance in the state.

Virginia Secretary of Health and Human Resources Dr. Bill Hazel said if the state is going to be forced into having the exchange for its citizens, it should be managed by Virginia and not the federal government.

“What we have done,” Hazel said, “is created a group to answer the question, ‘If Virginia is going to do one, what would it look like?'”

The group includes legislators and Dr. Hazel.

Uncertainty Remains

Although the federal Department of Health and Human Services (HHS) and its Centers for Medicare and Medicaid Services (CMS) have issued initial regulations and guidance on the exchanges, state officials are still in the dark about how much latitude they have. A spokesperson for CMS could not say when HHS would tell states how much leeway they would have in constructing their exchanges.

“We have worked closely with states to help establish their Exchanges and have provided a significant amount of guidance to date. We will continue to closely collaborate with states as we move to 2014,” the spokesman said.

Secretary Hazel says he thinks states will have “enough latitude that it makes a difference” who runs the exchange.

“What do you want the exchange to do? Is it going to be more of a passive market aggregator, if you will, where the plans that want to participate sign up, or is it going to be an organization that actively negotiates rates and so forth?” Hazel said. “That’s a big decision, and we would rather make those decisions in Virginia than to follow the federal program, in particular since we don’t actually know that the federal program will be.”

Michael Thompson, chairman and president of the Thomas Jefferson Institute for Public Policy, notes other states are continue their challenge to Obama’s law in court. But if the law is still in effect next year, Virginia Gov. Bob McDonnell (R) “would like to have some sort of rational effort to abide by the law,” Thompson said.

“Gov. McDonnell’s administration is trying to take an approach that will protect the state if the lawsuit by Florida and other states isn’t successful, and at the same time take as much of a market-based approach that you can take under the regulations,” Thompson said. “The problem is they are not real sure where those parameters are, because they haven’t all been provided.”

Medicaid ‘Churn’

Hazel said it was very important for the state to organize the interaction between Medicaid and the exchange themselves. Everyone in Medicaid up to 138 percent of the federal poverty level will use the exchange to select their coverage.

“It has to tie into your state Medicaid program eligibility, and there’s a lot of what we call ‘churn’ back and forth” between Medicaid and the exchange-based insurance products. “We don’t know exactly how that is going to work out right now,” Hazel said. “Between 138 percent and 400 percent of the federal poverty level people will be eligible, but at the top end people may not know if they are eligible or not. So we’ll have to process a large number of applications.”

Hazel would not give a ballpark cost estimate for updating Virginia’s Medicaid enrollment process or setting up the exchange, as that is part of the work the committee will be doing. Other states, such as Oregon, have implemented a tax on insurance premiums to fund their exchange past 2015.

“There are some who say at the end of the day you are still largely doing a federal program, but I think even within that there is opportunity to make some decisions,” Hazel said.