Insurance News

Federal grants awarded for health insurance exchanges

Posted on: August 24, 2011

The Obama administration has awarded more than $185 million in grants to 13 states and the District of Columbia to help establish new state-based health insurance marketplaces where consumers can shop for insurance starting in 2014, a key benefit of the new healthcare law.

These Internet-based exchanges, designed to help Americans who don’t receive health benefits through their employer, are intended to make buying health insurance akin to comparison shopping online for an airline ticket or a hotel room.

The exchanges will provide basic information about health plans, including premiums and covered benefits.

By 2019, the exchanges are expected to provide insurance for an estimated 24 million Americans, most of whom will receive subsidies to help them buy a health plan because they are expected to earn too little to bear the full cost.

Employers with fewer than 100 workers will also be able to use the exchanges, which will have to offer plans with a minimum level of coverage. No plans will be able to deny coverage to people with preexisting conditions.

The grants were announced Friday just as a key component in President Obama’s healthcare law, requiring all Americans to buy insurance, was ruled unconstitutional by a federal appeals court in Atlanta. The issue is likely headed to the Supreme Court. Leaders in 26 states challenged the law in court last year.

Obama administration officials have been racing to get states to set up exchanges because they are central to the coverage expansion envisioned by the new law. That effort has been embraced by some state leaders and resisted by others critical of the law.

The new grants went primarily to states with Democratic governors who have moved most aggressively to implement the new law, including California, Illinois, Maryland and Connecticut. Three other states have already received these planning grants.

California, which was the first state to pass legislation establishing an exchange, received the largest grant at more than $38 million.

Federal funding also went to three states with Republican governors, including Indiana and Nevada, who are a part of the multi-state lawsuit.

Mississippi — led by Gov. Haley Barbour, a former chairman of the Republican National Committee — will get more than $20 million, making it one of the largest recipients of federal aid.

Barbour said Friday that his state’s exchange “will be very different from the health exchange envisioned by Obamacare.”

Other Republican-led states, including Florida, have turned their back on federal assistance, even though the law requires the federal government to operate an exchange in any state that does not establish its own.

Louisiana Gov. Bobby Jindal, a Republican, has already announced that his state will not run an exchange. And Oklahoma Gov. Mary Fallin and Kansas Gov. Sam Brownback, also Republicans, recently returned federal grant money to help set up exchanges.

Brownback said in a statement this week that his decision was budgetary. “There is much uncertainty surrounding the ability of the federal government to meet its already budgeted future spending obligations. Every state should be preparing for fewer federal resources, not more,” he said.

Obama administration officials and many insurance experts have urged states to develop their own exchanges rather than have the federal government operate one overseen by officials in Washington who will be less familiar with the local insurance market. And in a letter to governors Friday, Secretary of Health and Human Services Kathleen Sebelius again urged them to take advantage of the grants.

The administration also Friday proposed new rules to help states design exchanges that will allow consumers to easily sign up for insurance and get any subsidies they may qualify for.

The new law makes all Americans earning between 100% and 400% of the poverty level eligible for federal aid, which will be administered through a complex process in which the federal government pays commercial insurance companies directly for a portion of premiums.

That means a family of four making as much as $89,400 could be eligible for aid. Subsidies, which will vary depending on income, are expected to average about $5,000 a year.

Americans making less than the poverty line will be eligible for the government Medicaid program.

Copyright © 2011, Los Angeles Times

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