Since the Patient Protection and Affordable Care Act (PPACA) was enacted in 2010, health insurers have been preparing to operate in the new health insurance environment that begins in 2014—one that includes individual and employer-provided coverage mandates, guaranteed issue for coverage and health insurance exchanges.
But, according to insurance rating firm A.M. Best Co., many states are not moving forward to meet the Jan. 1, 2014, deadline for establishing the state-operated health insurance exchanges that are intricately tied to the employer mandate—and to the penalties employers would pay for failing to provide affordable coverage under the PPACA.
Moreover, the exchanges must be up and running no later than October 2013 to be accessible during open enrollment for the plan year starting in January 2014.
Preparing for Exchanges in 2014
"Health insurers have been in discussions with governors, state legislatures and insurance commissioners on the importance of establishing a framework for state-based health insurance exchanges,” said Sally Rosen, managing senior financial analyst at A.M. Best. However, as of July 2012, "less than one-third of the states had passed exchange legislation, and numerous states had taken no significant steps toward developing exchanges or passing exchange legislation," she observed.
"States are behind. There is a lot of work that needs to be done," Rosen noted.
Some state officials plan to wait until the outcome of the November 2012 presidential and congressional elections are known, in the belief that a Republican president and Congress might repeal or substantially alter the health care reform legislation. (The National Conference of State Legislatures provides this overview of states' progress in setting up exchanges.)
Under the PPACA, if a state does not have a state-based exchange established in time for a Jan. 1, 2014, effective date, the state would use a federal government-run exchange set up for the state.
The Obama administration said it is on track to set up federal health insurance exchanges by 2014 in U.S. states that fail to establish their own, and that the U.S. Health and Human Services Department will issue new guidance before the end of summer 2012 on how federally facilitated exchanges are expected to operate, Reuters reported on July 27, 2012.
However, it remains unclear whether the federal government actually will be able to set up exchanges for a high number of recalcitrant states, and Congress would have to maintain funding for the federal-run exchanges—which could be problematic if the Republicans were to win control of the Senate and maintain control of the House, even if President Obama is re-elected.
In addition, opponents of the health care reform law have argued that according to its statutory text only state-run exchanges are allowed to pay subsidies, and lawsuits around this issue are expected.
Given the high level of uncertainty, it's possible the exchange deadlines will be extended. "Much work needs to be done to make exchanges operational, and rules have yet to be defined, such as essential benefits and subsidy levels," Rosen noted. As such, "there may not be enough lead time to get exchanges fully operational before open enrollment for a Jan. 1, 2014, effective date."