Editor’s note: On July 17, 2012, Gov. Steve Beshear signed an executive order creating the Office of the Kentucky Health Benefit Exchange, a web-based marketplace where Kentuckians can shop among health insurance options. The exchange is a requirement of the federal Patient Protection and Affordable Care Act. The state has received three federal grants totaling $66.4 million for its planning and implementation.
According to the governor, the development and operation of the exchange will be financed entirely with federal dollars until Jan. 1, 2015. After that date, the administrations plan calls for the system to be financed entirely with revenues it generates.
The Governor’s action has not been without controversy.
Following the executive order, the state legislature’s Capital Projects and Bond Oversight Committee, voting 4-3 along party lines, rejected plans by the Cabinet for Health and Family Services to lease accommodations for the health insurance exchange. Using its authority to override the committee’s action, the Beshear administration entered into the lease “to make sure that we don't fall behind on implementation and run the risk of a federal takeover of our health benefits exchange."
In the following commentary, Senator Tom Buford (R-Nicholasville), Chairman of the Banking and Insurance Committee and Vice-Chair of the Health and Welfare Committee, offers his views on the exchange.
As the chairman of the Senate Banking and Insurance Committee, I have dedicated my professional life to understanding how insurance can best protect people from events that they may not be fully prepared for. What to do with exchanges is a policy decision that public officials will have to address, especially in the wake of the U.S. Supreme Court decision upholding most of the Patient Protection and Affordable Care Act (ACA).
States are being pressured to establish federally regulated and approved health insurance exchanges by 2014. If a state opts not to create its own exchange, the federal government will implement one for you. To date, only 15 states have begun the process of establishing an exchange. Many others have resisted moving forward for the following reasons, and I feel Kentucky should use extreme caution, also for the following reasons:
• The final exchange rules still do not explain all the necessary requirements. With incomplete information, states that move forward with implementing an exchange risk investing valuable time and taxpayer dollars only to discover their exchange does not comply with federal regulations.
• The threat of a federally run exchange is a red herring: ACA does not provide the federal government with adequate funding to set up or operate federal health insurance exchanges.
• No matter the type of exchange, states will not have full authority over their own health-care exchanges anyway, according to language within the ACA.
• Implementing an exchange will result in high administrative and operational costs, and those costs will rise soon after initial implementation. Federal funding for exchanges is expected to run out by 2014, making state spending increases inevitable.
As the federal government continues to take control over health care from the states while cutting funding, state officials should be extremely careful and resist setting up health insurance exchanges because these exchanges must be approved by the secretary of the U.S. Department of Health and Human Services (HHS). Several states already have sent exchange models to Washington, only to have them rejected.
Keep in mind, there is no such thing as a “state” exchange under the ACA. Financial assistance from the federal government will end by 2014, forcing states to look for ways to compensate, thus increasing state spending. It will require fees set upon insurance companies that translate to premium increases. The insurance companies will have to pass this on to the consumer. Millions of hard-working Americans are likely to be dropped from their existing health insurance plans and forced into flawed bureaucratic exchanges.
Only two states are currently in operation in the United States: Utah’s exchange and the Massachusetts Commonwealth Connector. Both have failed to produce low-cost or consumer-driven health care. Massachusetts spent more than $29.4 million in 2009 alone on the Commonwealth Connector, not including the high administrative costs. Health insurance in Utah is more expensive inside the exchange than on the market.
This is why in the Capital Projects Committee, I voted not to authorize funds for expensive office space for the governor’s health insurance exchange and in the Health and Welfare Committee, I argued for rejecting the governor’s executive order implementing such. To pay for office space, hire consultants, and expand the size of government at taxpayer expense without having a concrete plan in place showing how Kentucky will benefit is simply incompatible with my way of thinking.
Senator Tom Buford (R-Nicholasville) represents the 22nd District, including Boyle, Fayette, Garrard, and Jessamine counties.