Affordable Care Act

How Many State PPACA Exchanges Will There Be on January 1, 2013?

The New York Times ran an interesting article this morning by Robert Pear, titled: “Many States Take a Wait-and-See Approach on New Insurance Exchanges.” The article makes clear that states are all over the board in how they are approaching the coming deadline, on which the decision will be made whether the state or federal government will run the exchange. It is impossible to understate the role of politics in anything having to do with health care, health care reform, or health insurance regulation these days.

In that light, it is fascinating to me that the states with leaders most opposed to the Affordable Care Act, those who object the most loudly to the federal mandates, are often the states purposely not working on exchanges. That seems to be putting all of their eggs in the Supreme Court basket. If the law is upheld and they have nothing to offer, the federal government will be running the exchanges in their states. No doubt there will be much finger pointing at that time. But it seems quite unlikely that those state legislatures will simply accept the loss, take responsibility for not working toward the deadline and quietly accept a federal exchange in their state.

Mr. Pear’s article refers to research by the nonpartisan Urban Institute, which found that 14 states had made significant progress, while 16 had made little or no progress and the remaining 20 were “somewhere in between.”

The article also points to what Mr. Pear describes as a “curious twist” saying that “insurance companies, which battled Mr. Obama over health care in 2009 and 2010 are now urging state officials to set up exchanges.” The article says that insurers tend to prefer state regulation to federal and they have a financial interest because payments will come directly from the US Treasury for insurance covering low- and moderate-income plan participants.

I think there is another reason, too. Health insurers did not uniformly jump behind PPACA in 2009 or 2010. They also cannot function efficiently in an environment of regulatory uncertainty.

In my view, certainty is one of the keys to effective regulation of any industry because it allows regulated entities to develop policies and procedures that are built around compliance. Uncertainty, especially for long periods of time and with deadlines looming, is often worse for business and more expensive than what might otherwise be considered burdensome regulations.

Insurers have to plan and develop procedures for compliance with PPACA. While some state legislatures and politicians may feel comfortable waiting and pushing the deadlines set under the law, insurance companies are used to being regulated. When there are upsides for them, as there are with PPACA, it is generally better for business to get on with it.

Mr. Pear included some very interesting examples of specific states and the political issues that have arisen over implementing the exchanges. None of them are rooted in what is good for consumers in those states or for the insurance companies trying to do business in those states. Rather the exchanges are mired in a party-line battle that is so familiar and so tiresome these days.

If the Supreme Court holds the law unconstitutional, so be it. But in the meantime, it is the law. And, in my opinion, it doesn’t do any interested party any good for states to refuse to implement it; it only prolongs the period when there will be confusion. For insurance companies, there are few things that make success more difficult than regulatory uncertainty.