Affordable Care Act: State Action Newsletter

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October 21, 2011

State Actions on Health Insurance Exchanges

NCSL launched an updated resource on State Actions to Implement Health Insurance Exchanges. The Web page includes an interactive map with updated information on legislative and executive branch actions. The legislative actions section include information on legislation addressing planning or implementation, such as Nevada’s bill creating the Silver State Health Insurance Exchange as an independent state agency.

The executive branch section includes specific governor or state agency actions. For example, South Carolina Governor Nikki Haley established the state Health Exchange Planning Committee through Executive Order 2011-09. The order defined the committee as an advisory group to assist with research as determined by the director of insurance and to provide recommendations on the health insurance exchange planning process as described in the Exchange Planning Grant application. If the committee recommends a state-based exchange, it must include detailed recommendations regarding the structure, governance, etc. of the exchange.

In Kansas, despite the return of $31.5 million in early innovator grant funds, Insurance Commissioner Sandy Praeger is pursuing exchange planning. Praeger requested a steering committee charter to make recommendations to the Department of Insurance regarding the planning and development of a Kansas health benefit exchange. In addition, eight planning workgroups comprised of citizens across the state will report to the steering committees on issues related to their specific workgroup topic. View the PowerPoint presentation by Praeger at NCSL’s 2011 Legislative Summit here.

States Create HIT Incentives

As of Oct. 20, 33 states have created incentive programs for providers to switch to using electronic health records in their practices. The funding to support these programs is largely provided through the federal Medicare and Medicaid Electronic Health Record (EHR) Incentive Programs. The programs are designed to “provide incentive payments to eligible professionals, eligible hospitals, and rural-based facilities designated as critical access hospitals as they adopt, implement, upgrade, or demonstrate meaningful use of certified EHR technology in their first year of participation and demonstrate meaningful use for up to five remaining participation years.”

States that meet the requirements are eligible to receive 90 percent federal matching funds for administering this incentive program.

Eligible professionals can receive up to $63,750 over six years, if they choose to participate. Payments to eligible hospitals are based on a number of factors and begin with a $2 million base payment. A full payment schedule can be found on the CMS website.

Although the incentive program and the use of meaningful standards were created by the American Recovery and Reinvestment Act of 2009, not the Affordable Care Act, achieving meaningful use of certified health information technologies is widely considered to be a crucial component to preparing for the additional 30 million patients set to enter the system as a result of the Affordable Care Act.

Massachusetts Considers “Global Payments” to Reduce Costs

Massachusetts Governor Deval Patrick and legislative leaders are considering a plan to curb rising health care costs by replacing the current fee-for-service payment model with a system of “global payments” to health care providers. Since the state’s adoption of broad-based health reform legislation in 2006, it has achieved nearly universal health insurance coverage. The state’s per capita health spending, however, remains 15 percent above the national average, according to a 2010 state report.

Under a global payment system, health care providers are paid a fixed amount per patient per month, rather than for each individual visit or service. Capitation, the payment method used by health maintenance organizations, which grew dramatically in the mid-1990s, is a type of global payment that is familiar to Americans. Today’s global payments also include incentives to improve the quality of care and patients’ access to it. This new model rewards health care professionals for providing high quality care and for integrating and coordinating services, by linking compensation to results rather than to the number of services provided. It also includes better ways to adjust payments for the overall health and specific chronic conditions or “risk level” of the patients covered. Because providers or networks of providers receive a flat rate per patient and assume the financial risk of managing their patients’ health, they have a direct incentive to keep costs within the global payment fixed amount. This concept of risk-sharing is not new in the United States. However, if the Massachusetts governor and legislature decide to institute a statewide system of global payments, it will be the first state to do so.

NCSL’s brief “Global Payments to Health Providers” contains more information on this payment model.

Building Small Business Health Insurance Options

By January 2014, states will be able to offer more health insurance options to businesses with fewer than 100 employees, through the Small Business Health Options Program (SHOP). The Affordable Care Act provides tax credits (up to 50 percent of the employer share of coverage) to small businesses that cover their employees through this program. States can set up a SHOP separately or merge it with the state-based health insurance exchange, which will function as a marketplace for health insurance, providing assistance, education and choices to consumers. Exchanges are intended to increase access and options to health coverage and increase competition within the insurance coverage market by reducing premiums for individuals and small businesses and providing assistance to subsidies, tax credits and cost sharing. Very small businesses are less likely to offer health insurance coverage to their employees—only 47 percent of those with three to nine employees provide coverage, while 72 percent of those with 10 to 24 employees do.

According to a recent Kaiser Family Foundation study that looked at insurance market competition, “a single insurer dominated at least half of the individual markets in 30 states and the District of Columbia in 2010. In the small group market, a single insurer was dominant in 26 states and D.C.” In most states, the individual and small group market showed similarities in insurer market shares.

Of the 14 states that enacted legislation to establish an exchange post-ACA, a few addressed building a SHOP; California, Colorado and West Virginia will create separate markets for the exchange and for the Small Business Health Options Program. Connecticut, Maryland and Washington have yet to determine if they will merge SHOP with the exchange.

Utah's existing health insurance exchange targets small businesses. It currently operates as a "defined contribution market" for small employers with up to 50 employees. This model allows employers to contribute a set amount towards their employee's coverage, which the employee uses to purchase insurance through the state's health insurance exchange. “A SHOP exchange should have some mechanism to help create cost predictability for employers, such as a defined contribution market,” says Utah Representative David Clark. “If an exchange fails to deliver any of these values, it is very hard to engage a small employer.” All of the "pilot" groups that participated in 2010 have re-enrolled in 2011, showing that employers were satisfied with their participation in the state exchange.