HHS Gives Three States Approval To Operate State-Based Marketplaces

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By Sara Hansard

June 16 — Arkansas, Delaware and Pennsylvania received approval from the federal government June 15 to operate their own Affordable Care Act health insurance marketplaces in advance of a Supreme Court ruling that could prohibit subsidies from going to enrollees in marketplaces run by the federal government.

Letters from Department of Health and Human Services Secretary Sylvia Mathews Burwell approving the three states to be state marketplaces were posted on a web page of the Center for Consumer Information & Insurance Oversight, which was updated June 15.

A release from Pennsylvania Gov. Tom Wolf (D) June 16 said the federal approval “is a critical step in the governor’s contingency plan to protect approximately 382,000 Pennsylvanians in case the United States Supreme Court rules that people are not eligible for subsidies to help them afford health coverage in states where the federal government runs the health insurance marketplaces.”

`Supported State Based Marketplaces.'

The three states would join Oregon, New Mexico and Nevada in setting up “supported state based marketplaces” that use the federal HealthCare.gov technology while conducting other functions as state-run marketplaces. The three states hope that would legally qualify them to be state based marketplaces in the event the Supreme Court rules in King v. Burwell that people in states where the federal government runs the health insurance marketplaces are not eligible for subsidies to help them afford health care coverage.

Wolf said in a separate June 16 e-mail to Bloomberg BNA that, “While this conditional approval by the federal government does not mean that Pennsylvania must set up a State Based Marketplace, we are now in a better position to provide security to those who may lose their subsidies, and possibly, not be able to afford their health insurance. The Wolf Administration and the PA Insurance Department look forward to working with the Legislature to authorize a State Based Marketplace if it becomes necessary.”

While the three states approved for state marketplaces June 15 won't be eligible for federal grants to help them start their exchanges, Pennsylvania Insurance Department spokesman Ronald Ruman said in an e-mail to Bloomberg BNA June 16 that the state anticipates start-up costs to be minimal because the state would use HealthCare.gov.

The CCIIO Web page lists 22 “conditionally approved” state health insurance marketplaces and five “conditionally approved” state partnership marketplaces. In state partnership marketplaces states oversee plan management as well as consumer assistance activities, while the federal government handles other marketplace functions.

Delaware Continues to Evaluate Options

Delaware Department of Health and Social Services Secretary Rita Landgraf told Bloomberg BNA in a telephone interview June 16 that Delaware would continue to evaluate its options regardless of what the Supreme Court decides, although the state wants to protect the approximately 19,000 residents who receive subsidies through the exchange.

“We're doing that evaluation from a fiscally responsible perspective,” Landgraf said. Since Delaware has previously been a partnership state marketplace, “It's not that much of a heavy lift to convert to a supported state-based marketplace,” she said.

The primary difference between the partnership model and the supported marketplace model would be that Delaware would have to collect fees from health insurers to operate the supported marketplace, instead of relying on the fees collected by HealthCare.gov, Landgraf said.

Landgraf also said that states may move to try to create regional exchanges, which are allowed under the ACA. Delaware officials previously talked to officials in New York and Maryland about contracting to use the technology platforms operated by those states, she said. “You'll probably be hearing more as this unfolds,” she said.

Potential Model

In a June 16 webinar on King v. Burwell, Jay Angoff, a partner with Washington-based law firm Mehri & Skalet PLLC and former director of CCIIO's predecessor, said that if the plaintiffs prevail, supported state-based exchanges may become the model some states follow.

Supported state-based exchanges aren't expressly authorized in the ACA, but it would be “a very small step” for the HHS to issue regulations or guidance to rule that supported state-based exchanges are state-based exchanges, said Angoff, also a former Missouri insurance commissioner.

The HHS's action granting approval to the three states to be designated supported state-based exchanges is “just going another step,” Angoff said. Burwell “essentially said as long as they promise to do it, we'll certify it. They don't actually have to have done anything; as long as they have attestations and there's an expectation that they'll get it done, it will be a state exchange,” he said.

“So I think that's really the direction that you'll see HHS go in, and I think more and more states will cooperate with HHS if the King plaintiffs win,” Angoff said, adding that he doesn't believe that will happen.

However, the HHS could be hamstrung to help if a state “absolutely refuses to cooperate in any way,” Angoff said. An estimated 6.4 million people are receiving subsidies in exchanges operated by the federal government in 34 states in 2015.

To contact the reporter on this story: Sara Hansard in Washington at shansard@bna.com

To contact the editor responsible for this story: Janey Cohen at jcohen@bna.com

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