A variety of pressing economic and health issues were addressedat the National Association of Governors (NGA) annual 2011 meetingheld in Salt Lake City, including elements of the PatientProtection and Affordable Care Act (PPACA) as well as statebudgets.

Hearing on Exchanges

Among other issues, NGA hosted a panel session on July 16entitled, “Health Insurance Exchange Implementation.”[1] “TheAffordable Care Act requires the establishment of one or two healthinsurance exchanges in each state and territory that are ready toenroll individuals in health plans by October 2013 for coverageeffective January 1, 2014,” said Wisconsin Gov. Scott Walker, chairof NGA’s Health and Human Services Committee. “The release of newfederal regulations this week makes this a very timely topic.Governors need more information so they can make the best decisionsfor their states.”[2]

Among other speakers, Steven Larsen, director, Office ofOversight, Office of Consumer Information and Insurance Oversight,Department of Health and Human Services (HHS), provided an overviewof the Proposed Exchange Rule issued by the U.S. Department ofHealth and Human Services earlier this month.

Emphasizing that PPACA gives the states the authority toimplement exchanges and flexibility on many particulars, Mr. Larsenoutlined three different options to make exchanges operationaland/or get federally certified:

• Fully-integrated state-based exchanged in operation by January1, 2014;
• Hybrid model where a state and the federal government shareexchange functions (e.g., a state could certify health plans;federal government oversee eligibility).
• Federally facilitated exchange.[3]

State Budgets, State Rights

However, state budgets and economic growth appear to be toppriorities for many governors. This sentiment wasexpressed by the Honorable Michael O. Leavitt during the exchangehearing when he noted in his opening remarks that“health reform is now economic reform…there is greatconnection between the debt reduction strategy, the ceiling andhealth reform.” Currently chairman at LeavittPartners, Hon. Leavitt is a past HHS secretary and former governorof Utah. While he acknowledges that “exchanges” are alegitimate solution, he also purports the Proposed Exchange Rulecould in fact seriously constrain state flexibility. Heencourages states to take the lead where they can and not justpassively follow HHS. Furthermore, Mr. Leavitt stressed theimportance of allowing states to create “private” exchanges as wellas those outlined in the Proposed Exchange Rule.

For a recent analysis of the new Proposed Exchange Rule, seeBenefitMall’s Legislative Alert at http://www.benefitmall.com/Services/Large-Group.

States Thinking About Fundamental Redesigns

NGA released a statement earlier this year underscoring thepressure facing governors. Government redesign efforts arepart of virtually every aspect of state policy in 2011 as governorsadjust to the “new normal in the wake of the great recession," saidJohn Thomasian, director of the NGA Center. "Governors are focusingon consolidation, streamlining bureaucratic processes andcontrolling employee and pension costs, while at the same timedoing as much as they can to spur job growth."[4]

Most, if not all, governors are feeling the heat as statesgrapple with PPACA’s mandate to expand Medicaid eligibility in anenvironment where the states are struggling to maintain currentcoverage thresholds. During the NGA hearing, Mr. Leavittnoted that tinkering around the edges of Medicaid by cuttingprovider rates or other incremental adjustments will not be enough. He encouraged policymakersto think about fundamental redesigns to ensure the ongoingfinancial viability of Medicaid programs around the country.

“Over the last two years, states have made significant changes,cutting spending by more than 10.7 percent – $75 billion – tappingrainy day funds, shrinking the size of government and streamliningstate services,” said Washington Gov. Chris Gregoire in a recentNGA press release. “Unfortunately, more difficult decisions willhave to be made over the next few years.”[5]

“Governors encourage the federal government to follow the leadof states and make the tough decisions to ensure the long-termstrength of states and the country,” said Nebraska Gov. DaveHeineman.[6]

Governors have called upon the Administration and Congress toadhere to the following principles for state-federal deficitreduction:

• Federal reforms should be designed to produce savings for boththe federal government and states;
• Deficit reduction should not be accomplished by merely shiftingcosts to states or imposing unfunded mandates;
• States should be given increased flexibility to createefficiencies and achieve results; and
• Congress should not impose maintenance of effort (MOE)provisions on states as a condition of funding.[7]

As a result of the 2010 election, over half of the stateselected new governors, the largest freshman class in history.Unlike the federal government, most states have to balance theirbudgets according to the NGA, so the deficit discussion takes on adifferent perspective than within their federalcounterparts.

Stay tuned for more details as BenefitMall continues to trackhealth care reform initiatives and other federal public policyactivities that might directly or indirectly impact brokers andtheir clients. Please monitor www.BenefitMall.com and www.HealthcareExchange.comfor further developments.

[1] To watch video of this session, go to http://www.nga.org/cms/render/live/AMVideos.

[2] See NGA press release at http://www.nga.org/cms/home/news-room/news-releases/page_2011/col2-content/main-content-list/health-insurance-exchanges-focus.html;jsessionid=BBBF8B7A770E31E5B9B18F547D3514EF.

[3] See footnote one.

[4] See NGA Press Release at http://www.nga.org/cms/home/news-room/news-releases/page_2011/col2-content/main-content-list/tough-budget-choices-smaller-gov.html

[5][5] See NGA Press Release at http://www.nga.org/cms/home/news-room/news-releases/page_2011/col2-content/main-content-list/states-call-on-federal-governmen.html

[6] Ibid.

[7] Ibid.