Litigation challenging the Patient Protection and Affordable Care Act focused on the individual mandate to purchase health insurance, while the aftermath of the Supreme Court ruling upholding the Act has brought the question of Medicaid expansion to the forefront. Little public attention has been paid to the central reform requiring health benefit exchanges, whereby the uninsured ineligible for Medicaid in each state will be able to comparison shop for private insurance and receive federal subsidies. With the battle over the Affordable Care Act lost, state legislators and governors opposed to federal health care reform are now resisting setting up exchanges. Where states failed to take federally-approved action by January 1, 2013 to set up such an exchange, the federal government will administer exchanges for states. The State of Washington has been among relatively few states actively working to set up their own exchanges. The establishment of an exchange is a complicated process, requiring work to ensure that offerings within an exchange are not disadvantaged relative to the private insurance market that will continue to exist outside it. In part, the avoidance of such adverse selection is to be accomplished by requiring that all health insurance plans, whether inside or outside an exchange, meet a certain actuarial threshold and conform to a benchmark plan’s standards.
With the federal Patient Protection and Affordable Care Act (“ACA”) to be largely implemented by 2014, little public attention has been paid to the central reform regarding health benefit exchanges. The multi-state litigation challenging the ACA centered upon the individual mandate to purchase health insurance. The U.S. Supreme Court decision upholding the ACA was notable for affording states the choice of whether to opt in, or out, of Medicaid expansion for the uninsured. Yet health benefit exchanges were ignored and are the very portals through which much of health care reform will pass and either succeed or fail.
Contrary to rhetoric about “Obamacare” and the specter of a federal health care takeover, almost all lines of insurance—including much of health insurance—are still regulated by individual states. Health care reform is more carrot than stick. The individual penalty under the mandate to purchase health insurance begins, in 2014, at only $95 or 1% of income, whichever is greater. Moreover, the employer penalty for not offering health insurance applies only to those with more than 50 employees—a penalty that will not apply to 96% of the nation’s employers. The penalties are much lighter than the inducements.
An extraordinarily complicated law (with regulatory guidance equally as complicated), the ACA in toto is too broad a subject to be covered in this article. Rather, this article focuses on the requirement that each state establish a health benefit exchange by 2014, or defer to, or partner with, the federal government. The State of Washington is among the more than one-third of states that have moved to set a state-administered exchange.
Brendan W. Williams, A Better “Exchange”: Some States, Including Washington, Control Their Health Care Markets While Most Surrender Autonomy to Resist Reform, 48 Gonz. L. Rev. 595 (2013).