As HIX Deadline Looms, States and Feds Scramble

UPDATED Nov. 13: The deadline for states to submit blueprints for state-based exchanges has been extended to Dec. 14. The deadline for a state to declare it wants to pursue a State Partnership Exchange has moved to Friday, Feb. 15, 2013. The deadline for states to declare whether they plan run a state-based exchange remains Friday, Nov. 16. View details.

The re-election on Tuesday of President Barack Obama removed any lingering doubts about the staying power of the Patient Protection and Affordable Care Act.

With that question settled, states and the federal government are now focusing their attentions on the complex array of programs, policies, and deadlines that will have to be crafted, approved, tweaked, implemented and met before "Obamacare" begins in earnest on Jan. 1, 2014.

The most pressing deadline falls Nov. 16, when states are supposed to submit a "blueprint" of their proposed health insurance exchanges to the Department of Health and Human Services. By some estimates only about 15 states are expected to provide detailed plans for their exchanges by next week, despite having two years to prepare. HHS has said it will operate exchanges in states that cannot or will not do it for themselves but it's not immediately clear how many states that will involve.

"The conclusion we are reaching at this point is probably a couple dozen states will have a significant federal presence," Ceci Connolly, says managing director of the Health Research Institute at PwC.

"Some of them may just defer to the feds entirely and have a federal exchange. Many will have what is being dubbed a partnership model where the feds could be doing a lot of the back office work—technology, infrastructure, records—and the state could handle more of the direct engagement with their citizens, perhaps some of the work around the provider networks in that state that they have a better feel for and have some views on."

As for the federal government's own plans to craft back-up exchanges for states that can't do it, Connolly says "we don't know for certain what progress has been made on the federal level because it has been somewhat quiet about that. There is a ton to be done on the exchanges in a very short period of time."

"I have a suspicion that in the next week or two we will see a flurry of announcements. We will see more regulations being released, more guidance," she says. "There is a certainty in Washington during an election year that from Labor Day to Election Day things just quiet down, and so it's the natural flow of things in this town that post-election you get a flurry of activity. If we were to wait until the end of November, we will have a clearer picture of where we stand."

Paul Keckley, executive director of the Deloitte Center for Health Solutions, says a federal backstop for exchanges "may not have all the capabilities in place to manage enrollment and eligibility and capture people, and they have to have that capability in place by Oct. 1 2013."

"The federal government has a lot of catching up to do," he says. "The reality is 32 to 35 states will end up in a federal partnership and that is many more than originally thought. We may have seven or eight states that simply say ‘I want the federal government to do it for me.' The federal government is going to be ramping up its efforts to get ready because these exchange blueprints are going to come in and they are going to realize they have a lot to do for the states."

Connolly and Keckley say there is no way of knowing what these exchanges will look like or how much they will vary from state to state.

"You've got 30 Republican governors now and most of the Red persuasion will move towards that active shopper model," Keckley says. "It's all over the place on the other states, but the tendency in most states is to allow multiple plans to participate if they hit the metrics on essential health benefits and they can comply with enrollment and eligibility standards."

"I think the feds will relax some of those requirements so it is easier for states to see that plans are stepping up and putting products on the exchange. The worst outcome is if this effort is made but the commercial plans say ‘I'll pass.'" 

Connolly predicts that some of the biggest state-to-state variances will center on what benefits are offered based on cultural and regional population health issues.

"There are different demographics in different states," she says. "I could see in Arizona or  Florida you may want products geared toward the pre-retiree age group. If you are in Texas or California you might want to think more about an immigrant population."

"Once you begin to understand the specifics of an incoming group of new customers that is when you tailor the products in certain ways, you communicate and educate in different ways, and you help the customers navigate the system. They will require much more tailored, targeted activities by the healthcare sector than it has been forced to do in the past."

The so-called fiscal cliff, which Congress left unresolved, could prove problematic for exchanges. Lawmakers in the coming weeks and months will be looking everywhere for savings, and PwC estimates that delaying implementation of the exchanges for at least one year could save the federal government an estimated $23 billion.

"There will be some pressure on the Obama Administration to consider delay, either from players that are not yet prepared and want more time to prepare or from people that are focused on the federal deficit," Connolly says. 

"We know that delay accrues some short-term budget savings because you have one year's worth of subsidies that won't go out the door. There are going to be a lot of different ideas kicked around in the next couple of months about where to save some money, so it's going to be under discussion."

Connolly says delays would not come without a downside.

"The administration will be reluctant to delay because so much work has gone into this and they're in a sense it wouldn't be fair to the insurance companies that have been working hard to compete on the exchanges and it wouldn't be fair to the states that have moved ahead putting everything in place. But that idea is going to be floated," she says.

The exchanges are supposed to generate about $55 billion in premiums in 2014, with most of that money coming from federal subsidies to help consumers offset costs.

"In that first year nine of 10 people shopping on the exchange will be shopping with a subsidy and that is revenue for insurance companies," Connolly says. "Also it's important money for providers because hospitals and large health systems that have big uncompensated care burdens want to transition those patients into coverage. So while there will be voices in support of delay there will be a number of voices on the other side."