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On the Third Hand: The Exchanges Are Coming - with Holes

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Plenty of people have been saying for months, maybe years that, if anything in the Patient Protection and Affordable Care Act of 2010 (PPACA) could survive the death of PPACA, it would be the health insurance exchanges, or Web-based health insurance supermarkets.

Health insurers tend to see an exchange system as a tool for making sales more efficiently. Brokers hope that they can somehow participate in an exchange, or even set up an exchange of their own. Ardent libertarians may oppose the idea of the government getting involved with exchanges but like the idea of private organizations setting up exchanges.

Hating an insurance exchange is like hating newborn kittens. What’s the point?

Alan Cohen, chief strategy officer at Liazon Corp., New York, a company that runs the Bright Choices private health insurance exchange system, says the Supreme Court ruling on the constitutionality of PPACA shoulld be great for exchange programs, by clearing up much of the uncertainty about the PPACA exchange provisions.

Until, today, when the Supreme Court ruling upholding most of PPACA came out, “the court action kept everyone so frozen,” Cohen said. Now, he said, ”this will be the law of the land.”

Unless Congress intervenes, or states rebel, states or the U.S. Department of Health and Human Services (HHS) will have an obligation to provide exchange services that individuals can use to find any public programs for which they might be available or use new tax credits to buy private coverage. Small businesses also are supposed to be able to use exchanges to find coverage.

About 5 to 10 states seem to have the will, knowhow and technology programs needed to meet the PPACA exchange startup deadline, Cohen said in an interview. PPACA calls for HHS to be the exchange runner for states without their own exchange programs.

Traditionally, the term “private exchange” seems to give HHS officials the creeps, but now HHS officials, and state officials, seem to be getting the message that they can work with brokers and private exchanges to fill in gaps in their own skills, systems and knowledge, Cohen said.

Private exhange programs, for example, might already have the complicated systems needed to determine whether consumers are eligible for Medicaid or Medicare, Cohen said.

The more HHS is involved with running exchange programs, the better the situation should be for insurance brokers and private exchange operators that want to do business with the PPACA exchanges, Cohen said.

If, for example, HHS officials have to manage an exchange for residents of Idaho, they’ll soon learn that they have gaps in their knowledge about Idaho, Cohen said.

“The more centralized exchange control is going to be, the more they’re going to need local representation,” Cohen said.

So: The PPACA ruling could be great for LifeHealthPro readers who can figure out how to do profitable business with the exchanges.

Meanwhile, the court — for completely reasonable reasons — said Congress can’t force states to expand Medicaid to cover residents at up to 133% of the federal poverty level by threatening to take away existing Medicaid funding. All Congress can do is put strings on new Medicaid funding.

On the one hand: The Supreme Court is absolutely right that Congress should not be able to bully states into complying with unfunded mandates. 

Many states are flat broke and are desperately trying to scrape up the cash to meet the promises they’ve already made to residents. They can’t afford to take on new benefits obligations.

On the other hand: The adults who would become newly eligible for Medicaid are probably, in many cases, the uninsured working poor people who, for example, might be the people catering our lunches and dinners when we attend meetings organized by America’s Health Insurance Plans (AHIP), Washington, and the National Association of Health Underwriters (NAHU), Washington.

How would you like to go up to the woman who helped keep the cold cuts tray fresh in the buffet at Wynn Las Vegas and say, “Great food, and great service. So happy the Supreme Court will keep the federal government from making Nevada let you into Medicaid!”

We have some readers who make a great, Ayn Rand-influenced case that taking tax money from people to provide benefits for other people is always wrong. And I think their case is a good, persuasive case. Even if the people paying the taxes are actually rich and the people getting the aid are very poor, how do you know, without the benefit of godlike powers, whether that transfer of assets is really reasonable? What if the wealthy person would have given the moey to a researcher who would have discovered the cure for Alzheimer’s disease, and the recipient is a jerk who would have blown the money on meth and was really mean and horrible long before he tried meth? Even if the rich person were? a jerk and the poor person were saintly, why should a government have the right to take tax money from a taxpayer purely to serve the interests of another taxpayer and not to 

On the third hand: Even when I try to bring out and amplify my Inner Robert Heinlein Reader, I find it hard to feel good about refusing to provide care for the sick, especially when the sick people are working and may even have purchased whatever limited-benefit health coverage they can afford. I’m not sure whether the percentage of AHIP and NAHU members who truly oppose all government aid for working poor people who need medical care is all that high. Even if we all woul prefer to see private charity and other private solutions fill the gaps, maybe that’s an area where even some folks who are genuine libertarians, not wishywashians like me, would tolerate a little fudging.

If PPACA: The Original Law, were completely intact, the working poor people could apply through one of the new exchanges and get free Medicaid coverage.

Now that the NFIB vs. Sebelius ruling has come out, it looks as if, at least in some states, we’ll have many people who are working but still too poor to pay for health insurance. What will happen to them when they approach an exchange?

 I guess they’ll soak up individual health insurance tax credit money like tax credit sponges. 

Maybe Congress will respond by ballooning tax credit costs by restricting access to the subsidies. The income level at which the government officially thinks a family can afford to pay the full, unsubsidized cost of coverage could fall to 350% of the federal poverty level or lower.

Maybe what all that really means for insurers and brokers is that, if the PPACA exchanges keep moving forward, we’ll suddenly end up with a huge new demand for supplemental health products and other limited-benefit medical products that can sold in PPACA World.

Today we have the commercial market and the Medicaid market; tomorrow, we might have the exchange-user market and the penalty-payer market. 

Correction: An earlier version of this article described NAHU’s location incorrectly. NAHU has moved to Washington.

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