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Insight Why Idaho Businesses Should Care Whether Idaho Establishes a State-Based Health Insurance Exchange

Idaho businesses should be paying close attention to the recent debate over whether and how Idaho should establish a state-based health insurance exchange. This is an issue at the intersection of business, law, and politics.

The debate over a health insurance exchange arises because the Patient Protection and Affordable Care Act of 2010 (PPACA) requires states to establish health insurance exchanges that serve the individual and small-employer-group markets. A health insurance exchange is an Internet-based marketplace for qualified health insurance plans that will sell health insurance the way travel websites, such as Orbitz or Expedia, sell airline tickets. In other words, the exchanges will offer standardized plans and information so customers can make “apples to apples” comparisons between competing health plans.

If a state fails to meet certification requirements by January 1, 2013, then the federal government will establish and operate the exchange in that state. A federal exchange will be structured around federal administrative and policy priorities. Citizens of a small state like Idaho will likely lose a significant amount of local control over the exchange if Idaho allows the federal government to establish and operate Idaho’s exchange.

Under PPACA, the state may establish an exchange as a state agency or by designating a private, nonprofit entity as the state’s exchange. Governor Otter’s health insurance exchange working group recently considered the private nonprofit option. Idaho’s business community also recently supported a private nonprofit health insurance exchange.

A state-based exchange will provide a great deal of local control over exchange design and operation within federal guidelines. The following examples illustrate the flexibility of a state-based exchange:

  • The composition of the board of a state-based exchange will be determined locally. The board must be composed of local stakeholders and cannot be majority controlled by insurance brokers or insurance companies.
  • A state-based exchange that is controlled by local stakeholders will be able to work with Idaho small employers, individuals, brokers, and insurers to identify the kinds of qualified health plans that suit local needs and also satisfy minimum federal standards. For instance, a state exchange could emphasize (i) “consumer driven” plans that feature high deductibles, tax-advantaged savings plans, and lower premiums or (ii) more traditional plans that offer higher premiums, lower deductibles.
  • A state-based exchange can be designed to be entirely self-supporting and have no access to state tax dollars. Federal dollars are available for states to implement exchanges, but by 2015 the exchanges will cease to receive federal support.

In a state-based exchange, local stakeholders, including representatives of local business, will have control over these and other variables. A state-based exchange offers local stakeholders—including businesses, consumers, insurers, and healthcare providers—an unprecedented opportunity to work cooperatively to set priorities and design a health insurance system that is designed to achieve stated goals, be it reduced costs, increased benefits, or other priorities. A federal exchange, by contrast, will likely offer a “one-size fits all approach” that will not be tailored to local needs and preferences.

The creation of a state-based health insurance exchange is an issue on the intersection of business, law, and politics. On the political front, Governor Otter has empaneled a working group that is reviewing Idaho’s options for a health insurance exchange. The Governor’s website has information and meeting agendas for the working group here. Business owners who seek to comment on the establishment of a state exchange may contact their state legislators, the Governor’s office, or the Idaho Department of Insurance. On the legal front, we have put together a team of attorneys with specialties in business law, employee benefits, and health care who are available to consult with business owners who seek to understand how PPACA and health insurance exchanges will affect their employees and their bottom line.

If you would like more information about this topic or other legal issues, please contact a member of our Health Law Group or call 208.344.6000.

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