States may need to take big steps to keep sub­si­dies

Modern Healthcare - - NEWS - By Har­ris Meyer

Some state officials and le­gal ex­perts ar­gue it should be rel­a­tively easy for states that have not yet es­tab­lished their own in­sur­ance ex­changes to find a le­gal work­around to re­tain fed­eral pre­mium sub­si­dies fol­low­ing last month’s rul­ing dis­al­low­ing sub­si­dies through the fed­eral ex­change.

But one noted le­gal an­a­lyst who sup­ports the Pa­tient Pro­tec­tion and Af­ford­able Care Act cau­tioned that it will take a lot more than se­man­tic ma­neu­vers.

In a Health Af­fairs on­line ar­ti­cle last week, Wash­ing­ton & Lee Univer­sity law pro­fes­sor Tim Jost laid out five ma­jor steps states will have to take to “es­tab­lish” their own ex­change and en­able their res­i­dents to keep their fed­eral pre­mium tax cred­its, if the fed­eral ap­pel­late court rul­ing in Hal­big v. Burwell is ul­ti­mately up­held.

“Es­tab­lish­ing a state ex­change takes time, and will prob­a­bly, in most states, take leg­isla­tive ac­tion,” Jost said in an in­ter­view.

The rul­ing is caus­ing great anx­i­ety among state officials be­cause it could mean the loss of sub­si­dies worth $36 bil­lion to 7.3 mil­lion Amer­i­cans in 2016, ac­cord­ing to the Ur­ban In­sti­tute.

Ex­perts have sug­gested that some states—par­tic­u­larly the seven that have fed­eral part­ner­ship ex­changes—may be able to eas­ily ful­fill the re­quire­ments to meet the def­i­ni­tion of a state-based ex­change.

Some state officials ar­gue the part­ner­ship ex­change in their state should be con­sid­ered a state-es­tab­lished ex­change be­cause the state car­ries out some of the mar­ket­place func­tions. At­tor­ney Mark Rust, chair­man of Barnes & Thorn­burg’s health­care prac­tice in Chicago, said the states with part­ner­ship ex­changes al­ready may meet the stan­dard for hav­ing a state-es­tab­lished ex­change, and that other states could

“It is not enough for a state sim­ply to set up a web­site.”

fairly eas­ily con­vert to this hy­brid model.

But af­ter a close read­ing of var­i­ous sec­tions of the ACA and of HHS reg­u­la­tions, Jost wrote it’s not go­ing to be that easy. To “es­tab­lish” its own ex­change, a state must:

En­act au­tho­riz­ing leg­is­la­tion or have a prop­erly is­sued ex­ec­u­tive order es­tab­lish­ing the ex­change.

Es­tab­lish a prop­erly con­sti­tuted gov­ern­ing board. Is­sue gov­ern­ing prin­ci­ples. Ful­fill all ex­change func­tions di­rectly or through con­tract­ing with a pri­vate en­tity or un­der ar­range­ment with HHS.

n Pro­vide fund­ing for the ex­change, which must be self-suf­fi­cient for 2015.

“It is not enough for a state sim­ply to set up a web­site,” Jost wrote. “It is also not suf­fi­cient if a state de­part­ment of in­sur­ance op­er­ates some func­tions in a part­ner­ship re­la­tion­ship with a fed­eral ex­change.”

So, state elected officials still may have to do the hard po­lit­i­cal work to es­tab­lish a state-run ex­change.

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