While health reform switches to the slow track in Washington, states are moving full-steam ahead on the issue, with more than half of them seeking to pre-empt any proposed federal health reform mandates, such as requiring residents to purchase health insurance.
The states go marching in
With an impasse in Washington, some states are taking sides in the reform debate
Statehouses also are deliberating a flurry of bills to expand coverage to the uninsured, set up insurance exchanges and establish a single-payer system to name just a few examples.
To be sure, states are hamstrung by fiscal woes and battered by the recession. As a result, many of the proposals coming out of statehouses and governor's offices are budget-neutral.
“The dominant issue is the state of state budgets,” said Richard Cauchi, health program director for the National Conference of State Legislatures. “So many states have fiscal shortfalls. There may be good intentions, but it is unlikely to be a year for big changes.”
Something new on the agenda this winter is organized opposition to federal health reform mandates. In at least 28 states, lawmakers have introduced bills that directly challenge aspects of congressional reform bills, with some states moving quickly toward enactment.
“That is clearly a new, visible direction of the past two months,” Cauchi said.
In recent weeks, statehouses across the country made progress on nearly identical bills that would impose a constitutional amendment to make it illegal to require residents to purchase health insurance.
These so-called Health Care Freedom Acts largely stem from a ballot initiative that narrowly failed in Arizona two years ago. The initiative is back on the Arizona ballot this November, after passing the state Legislature last June. The Arizona Hospital and Healthcare Association has not taken a position on the measure.
In brief, the Arizona measure declares that residents have the right “not to participate in any health system, of any type.” Bills introduced in some states would also require states to sue the federal government if an individual mandate is enacted into federal law. Other bills specifically exempt employers from any mandate to purchase insurance. Legal scholars disagree about their constitutionality, and it's possible any federal mandate would trump state law.
Virginia state Sen. Jeff McWaters, a Republican representing Virginia Beach, voted in support of a package of bills pre-empting federal reform that passed the Democratic-controlled body on Feb 1. McWaters is the founder of the managed-care insurance company Amerigroup Corp., and was elected to the state Senate on Jan. 12.
The pre-emption bills are “the last line of defense that we have,” McWaters said. “It's the rejection of the government takeover of healthcare,” he continued. “The ultimate vision is to see everyone have access to a physician in an organized system of care. But that's not what we've seen from Washington.”
Most of these state pre-emption bills were filed just after the new year. Fresh from the Christmas Eve Senate vote on healthcare reform, which included a mandate that individuals carry insurance, some state lawmakers were eager to object. But then Scott Brown won the Massachusetts Senate seat previously held by the late Sen. Edward Kennedy on Jan. 19, denying Democrats a filibuster-proof majority in the Senate and cooling health reform talks in Congress.
“The anticipation or uncertainty of health reform has affected the legislative filings,” Cauchi said. “The new change in direction in Congress didn't give state legislatures any time to pivot.”
Other statehouses are seeking to block federal program mandates. New Hampshire has a bill that would prohibit any Medicaid expansion unless it is paid for by the federal government or approved by the state Legislature. Both the House and Senate included Medicaid expansion in their reform bills but only select states, such as Nebraska, have guarantees that the federal government would fully fund the program, drawing fire from state lawmakers across the nation.
Meanwhile, other states are looking to expand programs for the uninsured at no cost to taxpayers.
Wisconsin Gov. Jim Doyle in January unveiled a new health plan that would offer coverage to qualifying adults without children on a waiting list for state-sponsored coverage.
Called BadgerCare Plus Basic, the new plan would be an elementary health plan, including up to 10 doctors' visits each year, one hospital stay and five outpatient visits a year, up to five emergency room visits a year, generic prescriptions and catastrophic coverage after a $7,500 deductible. The plan would cost members a monthly premium of $130.
Qualifying participants would be required to have incomes below 200% of the poverty level, or $21,660 for an individual based on 2010 guidelines. The plan aims to cover the 23,000 adults on the waiting list for BadgerCare Plus Core Plan, which suspended enrollment in mid-October 2009 because of budget constraints. There are about 64,000 people enrolled in that program, which serves adults without children with incomes too high to qualify for standard Medicaid and is funded with disproportionate share dollars. The state Legislature is expected to take up the bill related to the new basic plan in the coming weeks.
The basic plan would be run by the state, which has set aside a $1 million reserve in case medical costs run higher than expected. Enrollment is expected to begin May 1, pending Legislature approval, according to state officials.
Wisconsin's approach is attracting some national attention. Doyle spoke in Washington about ways states can expand coverage, sharing the podium with officials such as HHS Secretary Kathleen Sebelius at the annual National Health Policy Conference on Feb. 8.
Doyle told Modern Healthcare that the state has achieved the goal of providing access to coverage to 98% of people in Wisconsin. BadgerCare Plus Basic will help his administration cover even more people. Wisconsin ranks only second to Massachusetts among states in the number of insured. It offers coverage to all children under 18 as well as qualifying parents.
While Doyle, a Democrat, admits the new unfunded plan is bare-bones, and that many people will not be able to afford the $130 monthly premium, it is meant to be a bridge for people who cannot afford or qualify for insurance on the individual market.
And Doyle says that, even in lean years, states can do a lot to extend healthcare to residents.
“The most extreme Republican position is: Forget these people,” Doyle said. “The most extreme Democratic position is: Everyone should have the same health plan as Congress. You know, there's a lot of room in between those two.”
Washington state is moving to set up a similar program for uninsured residents. It would be a new option for the 90,000 residents on the waiting list for the state-funded plan, called Basic Health, serving people earning up to 200% of the federal poverty level. Insurers operating in the state were asked to submit bids on Feb. 5, and they are due on March 5, said Dave Wasser, spokesman for the Washington State Health Care Authority. If contract negotiations are successful, the plan would be offered starting July 1, he added.
In Wisconsin, the new health plan would be open to people regardless of pre-existing conditions. In Washington state, applicants would fill out a health questionnaire, and people with more severe health problems would be channeled to the state's high-risk insurance pool instead, Wasser said.
The next step in the process in Wisconsin is to create a health insurance exchange—and it was on Doyle's agenda before the recession hit, he said. The idea, he said, was to do a “mandate lite,” where small businesses would be required to buy insurance through the exchange, which would be community-rated so costs don't vary wildly among participants.
Doyle, who leaves office in January 2011, says he doesn't think Wisconsin will get that far this year. He said he hopes federal reform will move forward and help states set up exchanges.
“We'll do it if the federal legislation passes,” Doyle said. “It would be foolish to set up an exchange first and then the feds pass it and it is all different.”
Utah began implementing a health insurance exchange last year, starting with select small businesses. Now, the state is seeking to pass legislation that would clean up some of the problems that have emerged since. It is also expanding the exchange to some large employers.
The Utah legislation would provide for modified community rating—as Doyle proposed in Wisconsin—to eliminate large cost disparities among participants. Basically, insurance companies would be prohibited from rating customers on health history, and would instead base rates on age or geographic area.
Out of the nearly 100 small employers that enrolled in the Utah exchange, only about 10% kept on with the program. The majority of participants cited premium differences as a factor.
“There were issues with pricing differences inside and outside the exchange,” said Cheryl Smith, strategic plan development manager at the Utah Office of Consumer Health Services.
For instance, small businesses that for years received a loyalty discount from a certain insurer saw that discount wiped out once they tried to buy insurance inside the exchange, because they were viewed by insurers as new business, Smith said. “Sometimes we find there's a disconnect between the marketing and underwriting divisions of health plans,” Smith said.
On Feb. 4, Utah launched an insurance exchange pilot with four large employer groups, including Zions Bank. In addition, Utah has been consulting with at least 11 other states on how to set up an insurance exchange, Smith said. “We have 2.5 million people in Utah, and it's taken us two years to get to this point,” Smith said. “It's an accelerated program.”
Oregon, too, is plugging along with its health reform efforts, as directed by legislation enacted last year. The law established the Oregon Health Authority, a new state agency that will open in July 2011. Among its tasks is to create a business plan for a health insurance exchange.
Other states, meanwhile, are asking Washington for more money for existing programs. California Gov. Arnold Schwarzenegger made headlines last month when he criticized the Senate health reform bill for giving enhanced Medicaid funds to only select states. Since then, Schwarzenegger, a Republican, has met with leadership at HHS seeking a better federal match for Medicaid. California has one of the lowest matches of states and is facing a $20 billion budget deficit for this fiscal year and next.
After his comprehensive reform plan failed in 2008, Schwarzenegger has “not wanted to do one-offs,” tackling the problem in pieces, said Richard Figueroa, healthcare adviser to the governor, at a Sacramento conference on health reform earlier this month. “He's trying to get a better shake on Medicaid.”
But the Democratic-controlled state Legislature sees things differently. Earlier this month, the state Senate passed a single-payer bill. The Assembly is expected to take it up this spring. Schwarzenegger has vetoed single-payer twice before and is expected to do so again.
Democratic state Sen. Mark Leno of San Francisco—the bill's sponsor—is undeterred. Leno said the legislation lays the framework for a possible ballot initiative on single payer.
“We're different from Washington, D.C.,” Leno said. “There, Congress has the final word. In California, the voters have the final word.”
Change in the healthcare system must come from the states, said Leno, who last year co-authored a bill that ended health insurance rating based on gender.
“In Washington, the insurance industry has a death grip on Congress,” Leno said. “I think there's an even greater incentive for leadership on the state level.”
Last week, news broke that Anthem Blue Cross of California, a WellPoint subsidiary, planned to raise rates on the individual market by up to 39%, setting off a firestorm in Washington and in Sacramento (See story, p. 8). In light of the news, Leno said the state Legislature will likely take up a rate regulation bill that would require health insurers to substantiate rate increases and document actuarial data—as auto insurers must do.
A rate regulation bill was introduced last year by Democratic Assemblyman Dave Jones of Sacramento, but it didn't go anywhere. Jones chairs the Assembly Health Committee and last week said he would hold a hearing on rate regulation on Feb. 23.
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