Five Reasons Why New Jersey Must Quickly Establish a Health Insurance Exchange

Fifteen states are busy setting up their own health insurance exchanges under the Affordable Care Act (ACA). Not New Jersey. Despite several years of prep work by stakeholders, legislators and health care representatives, New Jersey has not established an exchange, which is essential to provide about 800,000 uninsured individuals and many small business employees access to affordable health coverage starting January 1, 2014.

Although the legislature passed a bill creating an exchange on March 15, the governor vetoed it on May 10, saying he wanted to wait until the Supreme Court determined the constitutionality of the Affordable Care Act (ACA).

The Court upheld most of the health reform law on June 28. Now the governor says he wants to wait until after this November’s presidential election to either implement a state exchange, let the federal government do it, or stand by as his party continues its efforts to repeal the ACA.

Waiting any longer is bad for New Jersey. Here’s why:

1. Waiting means an unnecessary delay in crucial funding

Federal funds are available now to fully fund the design and launch of the exchange, as well as the first year’s operating costs. New Jersey can’t receive those funds unless it authorizes a state exchange. While these grants will be provided through 2014, the sooner New Jersey obtains the funds, the sooner it can put them to work to create a high-quality exchange and the better prepared we will be to reach uninsured New Jerseyans. In addition, key elements of the exchange – including outreach and consumer assistance – aren’t funded by the federal government, but by fees on insurers (these fees will also fund the entire cost of the exchange after 2014). But New Jersey can’t collect any fees until it creates an exchange. This is particularly problematic because outreach and consumer assistance should be ready to roll early in 2013.

2. Waiting makes it less likely that an exchange will meet New Jersey’s special circumstances

By November 16, New Jersey must notify the feds if it intends to run its own exchange, or leave it to Washington. Coming 10 days after the presidential elections, this leaves little time for reviewing a lot of complicated information and sharing it with the federal government.

If New Jersey opts for its own exchange, it has to show “sufficient progress” in setting it up by January 1, 2013 or the federal government will take over. Delay increases the risk that New Jersey will not be ready and will turn its fortunes over to an exchange it does not appoint or control.

While a federal exchange would help many of New Jersey’s 1.3 million uninsured residents obtain health insurance, it would probably not meet the unique needs of New Jersey.

• The proposed state exchange creates an oversight board that prohibits conflicts of interest; a federal exchange may not have as strong a protection against decisions that favor private over public interests.

• The proposed state exchange actively negotiates on behalf of consumers to get the lowest insurance rates; a federal exchange will not do this for at least the first few years.

• The proposed state exchange allows for a seamless consumer enrollment experience by creating a “one-stop-shop” for insurance, whether the resident is seeking Medicaid, private-market insurance, or any other type of coverage. A federal exchange will make it more difficult to create an easy-to-use interface for New Jerseyans.

• New Jersey already has some of the highest standards for health insurance in the nation; these standards should be considered when creating an exchange – a more likely scenario if the state sets it up than if the federal government does.

3. Waiting means fewer people are likely to become insured

“If you build it, he will come” might work in the movie Field of Dreams, but it does not apply to public programs. The Congressional Budget Office estimates that 57 percent of the uninsured nationally will obtain insurance in the exchange but the Urban Institute concluded that estimate could be as high as 75 percent for states with exceptional outreach which in New Jersey would represent about 100,000 additional insured individuals.

It is very unlikely, however, that New Jersey would achieve the higher rate in the first year unless it has the time to design and implement a state-of-the-art outreach and consumer assistance program. That extra effort will be particularly important in the exchange because many of the people who will be eligible for subsidies have never used publicly subsidized insurance before and will need help. A federal exchange would only make matters worse because the federal government does not have knowledge of, or existing relationships with, the many community-based organizations that will be needed to provide the consumer assistance, nor does it have the federal funding that will be needed in 2013 for these activities.

4. Waiting ties the hands of policymakers and threatens important consumer protections

New Jersey has done a good job in the initial planning for the exchange and in soliciting input from the public. But now the state has to decide what the policies of the exchange will be, so stakeholders can move their discussions from guessing what might be included to developing strategies to implement the policies. Some of the most important and consumer friendly policies will take the most time to implement, such as selecting board members who don’t have conflicts of interest and designing criteria for selecting participating insurance plans that will offer the best possible deals for consumers.

5. Waiting makes it more difficult to establish an effective eligibility system

Under the proposed exchange, the state will create a website where individuals and small businesses can obtain health coverage and learn if they are eligible for any subsidies. This website must be as user-friendly and efficient as possible, and it will take a great deal of time to ensure that’s the case. With just over 14 months to go until applications will be accepted, delaying the exchange greatly increases the possibility that there could be major disruptions in the eligibility process that could result in incorrectly denying or delaying assistance. It also gives the developers of the technology and the interface less time to make the website easy to understand and use.

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