According to Senator Kemp Hannon (R – Nassau) and Chair of the Senate Health Committee and Senator James L. Seward (R-C-I – Oneonta) Chair of the Senate Insurance Committee, the bill was directed to the Senate Rules Committee due to several intensive discussions which could not be completed before the recess of the Legislative Session, which had been bogged down by intense conferencing and amendments for the Marriage Equality Act.

Senator Hannon said, “At this point, I would rather negotiate and have a three-way, but if we have to leave Albany without anything, I would rather have a bare bones bill that passes and allows people to adopt it and all of the other policy decisions that they are seeking to hang on to this as if it is a Christmas tree. They can figure out how to do that later on.”

Hannon continued, “As of June 14th information from the National Conference of State Legislatures that 10 states enacted or passed legislation; legislation is pending in another 10; and legislation failed, withdrawn or expired in 13. That is only 33, so I don’t have an answer for the rest. The funding opportunities are on a quarterly basis, so if you do not make the decision by June 30th, you can make September 30th decision. New York has already received two grants, which is at least one grant more than I think any other state has received. The first was for $27 million and the second was for $1 million. We received the Early Innovator Grant and we received the start up money. Sure, we would like more money, but I am not so sure we would totally lose out on that.”

The Exchange would be in conformance with the Patient Protection and Affordable Care Act of 2010 (PPACA), allowing the state to move forward with implementing its own exchange, rather than having the federal government operate one for the state, and give the State an opportunity to apply for future grant funding to complete the process by January 1, 2014 when the exchanges must be operational, according to Senator Seward.

Assemblyman Morelle (D-I Rochester), Chair of the Assembly Insurance committee, and Assemblyman Richard N. Gottfried (D-WF – New York), Chair of the Assembly Health Committee, expressed that there may be consequences is New York if it does not implement an Exchange. “I think there would be two consequences, one, the imposition of one by the federal government, secondly, the loss of federal dollars necessary to build a state-based exchange, which would allow New York to be essentially the master of its own fate,” said Assemblyman Morelle.

Senator Seward explained the purpose of the Exchange, which is required in every state under PPACA, is to ensure that individuals and small businesses have the opportunity to purchase affordable health coverage within a transparent and competitive marketplace.

“The exchange will provide mechanisms to educate consumers and help them gain access to appropriate coverage and to determine the availability of premium assistance tax credits and subsidies for coverage. The functions of the exchange include making qualified health and dental plans available to individuals and small employers beginning January 1, 2014, and certifying plans that may participate within the exchange according to federal law.”

Senator Seward said the Exchange is required to conduct studies of various policy issues and report and make recommendations to the Governor, Senate and Assembly on or before April 1, 2012. The Exchange cannot implement any recommendations on the issues set for in the studies without further statutory authority. Among the list of policy issues to be studied are:

The essential health benefits under the federal act and of the benefits required under the insurance law or regulations that are not determined by the secretary to be essential health benefits;
Whether insurers participation in the exchange should be required to offer all health plans sold in the exchange to individuals or small groups purchasing coverage outside of the exchange;
How to develop and implement the transitional reinsurance program for the individual market and any other risk adjustment mechanisms developed in accordance with PPACA;
Whether to merge the individual and small group health insurance markets for rating purposes including an analysis of the impact such merger would have on premiums;
The advantages and disadvantages of the exchange serving as an active purchaser, a selective contractor, or clearinghouse of insurance;
The anticipated annual operation expenses of the exchange, including but not limited to the development of any multi-year financial models, and the options to generate funding;
The impact of the establishment and operation of the exchange on the healthy New York program and the family health plus employer partnership program;
Procedures under which licensed health insurance producers, chambers of commerce and business associations may enroll individuals and employers in any qualified health plan in the individual or small group market as soon as the plan is offered through the exchange; and to assist individuals in applying for premium tax credits and cost-sharing reductions for plans sold through the exchange;
The criteria for eligibility to serve as a navigator within the Exchange; • Whether and to what extent health savings accounts should be offered through the Exchange;
Whether to allow large employers to participate in the exchange beginning January 1, 2017, and shall take into account any excess of premium growth outside of the Exchange as compared to the rate of such growth inside the exchange; and
The integration of public health insurance programs, including Medicaid, Child Health Plus, and Family Health Plus within the exchange, which may include such reports as are periodically submitted to the secretary, on or before April 1, 2012.

During the long and tedious debate Assemblyman Morelle stressed that the Exchange will be a Public Benefit Corporation governed by a Board of Directors. Assemblyman Morrelle said the board would be composed of nine voting members including the Health Commissioner and Superintendent of Insurance who becomes the Superintendent of the Department of Financial Services as of October 3, 2011. The Senate and the Assembly will each recommend two appointments for the Board.

Seven of the nine members of the Board would have expertise in relevant areas, including individual health care coverage, small employer health care coverage, health benefits administration, health care finance, public or private health care delivery systems, and purchasing health plan coverage. The remaining members – the Superintendent and the Commissioner – will serve as ex officio, voting members of the Board.

According to Assemblyman Morelle, the proposed Board of Directors aims to fairly represent the consumer and business populations of New York. “The exchange has to be set up as an entity that does business that has to be self-sufficient, and so you are going to need to have some expertise. So, I think the way that we will ultimately deal with that is make certain that there no conflicts built into it whether we use the Public Officers Law, or some of the Statutes that have been used in other states to ensure there is no conflict with members of the Board of Directors, so we are going to work hard at doing that. People want to ensure that there is adequate consumer representation, and we will do that. There will be adequate consumer representation. I just do not believe that you can do this entirely with consumer groups without having people who have on the ground experience in writing insurance, in being brokers for small businesses. As long as you have enough of everybody at the table, you will get every viewpoint expressed and them some, and then we will make the judgments based on what we hear and what we experience.“

“I think the Medicaid Director probably needs to be on it because all of the Medicaid enrollees will go through the exchange. I think you do need the Superintendent of Financial Services because they have the responsibility for regulating insurance companies in the business of insurance, and then obviously there is a considerable piece of this that deals with health programs that are not Medicaid and Childhealth Plus.”

The Board of Directors would consult with five separate Regional Advisory Committees, comprised of 25 representatives of stakeholders from sectors that will be impacted by the operation of the Exchange. The Regional Advisory Committees would assist in assuring that regional differences are fully considered when developing policy in the exchange.

Various statewide advocates have are keenly watching the proposal to assure equality in representation. “The State Senate and Assembly need to multi-task,” said Jessica Wisneski, Legislative Director of Citizen Action of New York. “New York needs a Health Exchange that will protect consumers and lower health care costs. Millions of uninsured and underinsured New Yorkers need access to quality, affordable health coverage. We strongly urge the Legislature to focus on this critical issue and pass legislation that will create a consumer-friendly Exchange.”

Heather Briccetti, acting-president & CEO of The Business Council of New York said, “Creating health exchanges under the federal health care reform law is a complex and challenging endeavor. If New York makes mistakes now they will damage our economy for many years to come. Finding affordable, quality health plans is the number one cost of doing business issue for many businesses in our state.”

Said Senator Kemp Hannon (R-C-I – Garden City), “Under different federal mandates, this bill sets up a bare bones structure so that the state can control its own destiny under health care mandates to allow for five regional advisory committees, so the different markets in the state can be heard from to implement certain federal requirements that need to be implemented and to take policy decisions such as active versus passive exchange, mandated benefits that are already in state law, whether or not to apply them, how to pay for them. It makes policy decisions and puts them off so that there can be a clearer picture as to what needs to be decided and how. We fought hard in the Senate for advisory committees on a regional basis. The initial inclination of the other parties in this negotiation was to have one advisory board statewide. We have five advisory boards that make up a cross section of the people who are involved in insurance in each of those areas.”

The regions are: the New York City region; the Metropolitan Suburban region; the Central region; the Northern region and the Western region. Each committee will be composed of five members who will represent a range of categories including: health plan consumer advocates; small business consumers; health care providers; the health insurance industry; licensed producers; and labor organizations.

Gregory Serio, former Superintendent of Insurance said, “I think the notion of the health exchange is burdened by its complexity when there are much more simple solutions that are available for both the federal government and the state government to drive greater availability of affordable health insurance to the public.”

“In a year where they are trying to downsize government, the creation of a public benefit corporation seems to run counter to trying to get a handle on the number of authorities and public benefit corporations that are out there, number one.”

“Number two, it is almost impossible for the Legislature and the Governor to craft a bill that actually works because the federal government still does not know what this program is going to look like. The folks at CMS and HHS continue to struggle to find the right formula for these health exchanges. Their work is not done yet, so it really is hard to imagine how the state can affectively put a bill into place when the Feds are still changing, in some cases materially, the conditions and terms of their program.”

“Just last week one of the representatives came out with the idea that they may allow interstate sale of health insurance. Now, if you allow the interstate sale of health insurance, you do not need exchanges; you do not need half of the Affordable Care Act because the interstate sale of health insurance will reduce rates immediately, and in some cases by a significant number because so much administrative inefficiency has been built into the health insurance system because it has been done on a stateby- state basis. There is plenty of room for state for state regulation to be done in an interstate commerce model of health insurance. Because we have done it on a state-by-state basis, we are paying for the inefficiencies in that system. They have lost the value and the artistry of simplicity in these systems.”

“One of the things that made the Heath Care Reform Act work so well over the years in three programs, expanded Medicaid, Family Health Plus, and Healthy New York, all relatively simple programs with very few moving parts. That is what made those programs successful.”

“What are we in a rush for? Will it really take two to three years to implement this? The rush raises a good question because the feds have not finalized their program. How is it that we are writing a comprehensive bill on this issue. I think if we do a bill now, it is entirely likely we will be back doing another exchange bill next year, or at least part of a bill. There will be more amendments to respond to the changes that the Feds make.”

Tom Faist, from the New York State Association of Health Underwriters said, “NYSAHU urges the Legislature and Governor to recognize and acknowledge in any legislation, the key role insurance producers play in the sale, service and administration of health insurance in NYS. It’s important for the long term success and growth of the Insurance Exchange that insurance producers are allowed to sell and service group and individual insurance policies both within and outside of the Exchange. Additionally, to maintain a level playing field and not adversely impact the already fragile group insurance market in NYS, all policies and procedures, including compensation, should be the same for all products whether they are sold through the Exchange or outside of the Exchange.”

Roberta Rifkin of Independent Health supports the premise of regional representation. Rifkin said, “One of the things that is very important to us as a Western New York plan is that there is a regional voice. I think we really need to make sure that in the exchange, there are regional variations. I grew up downstate, now I live in upstate. They are like two separate worlds. They are very separate marketplaces, and we really need to recognize that when building this new marketplace called the Exchange.”

Leslie Moran of the New York Health Plan Association expressed concerns about overregulation. “If you created another regulatory body in New York our level of regulation would just go up that much higher. Health plans right now are already regulated by two agencies, a third body is overreaching. We understand the desire to get things moving, so that there is movement here in New York, and that New York is committed to establishing an Exchange, but we think we can do that by setting a governance board, and setting the rules for governance without getting into the myriad levels of very complex policy decisions. Those can wait. It is not like they are going to be waiting for years. We are talking waiting a matter of months. Our position is go slow because it is better to create the framework and lay a foundation because that allows you to build something properly on top of it.”

Briccetti agreed that Legislators should proceed with caution when forming the exchange, “It would be a mistake to act too quickly and lock the state into an exchange structure and process that will not work for small businesses moving forward. That is why The Business Council urges the Governor and legislature to do no harm in adopting exchange legislation,” said Briccetti.

Others insist the action on the Health Exchange is more urgent. “The sands of time are quickly running through the hour glass,” said Elisabeth Benjamin, Vice President of Health Initiatives at the Community Service Society of NY. “New York consumers and small businesses need our legislators to quickly pass a law that will enable our health insurance exchange to get precious federal dollars and drive the hardest bargain possible with health insurance companies when it opens.”

Senator Hannon said, “The projection is that a million new New Yorkers will be eligible for the federal health care benefit. It is a monumental task to do this in a short period of time. Getting the structure done, having some of the choices made now allows you to do this in a rational way, instead of a last minute, hurry-up basis. It also means you do not have to default to the federal government, which is what the federal law says. If the state does not enact by some point in 2013, the federal government will run its exchange. I think it is far better for the state to have its own destiny.”

Michael Barrett, Legislative Representative for the Independent Insurance Agents and brokers, said “Our basic approach in talking to policy makers on this is recognizing the exchange has to be implemented in New York, as part of the Federal Health Act. The exchange basically would mirror as much as possible what is happening in the private sector. So we would like to see agents and brokers have the ability to work with the exchange on behalf of their business clients in order to purchase health insurance coverage, and that’s been an important issue, obviously, for the Independent Agents and Brokers.”

“Agents and brokers around New York State and around the country, but particularly New York State, have thousands of small business people that they get property, casualty insurance and health insurance for, and we think it is important that they have the ability to work with the exchange where necessary to get the coverage, as well. We are very concerned about the concept that the exchange would be another regulatory authority. We think there should be some limitations on what the exchange can do from a regulatory perspective. We think it does not make a lot of sense to have a third regulatory authority in New York State.”

“We think even if policymakers are going to give the exchange some authority, it should be just related to the operations of the exchange, and not give them a broad regulatory mandate that would allow them determine benefit levels and other aspects of coverage that are currently regulated in the Insurance Department, and in some cases the Health Department,” explained Barrett.

“I think there is agreement that there should be a board. There is a question – how large it should be? You want to make sure that you have people that are involved, whether they be health plans, or health companies, or agents, or brokers, or some consumers of insurance. You want to make sure that all of those groups are represented in the deliberations of the board. The other part of the question is should there be some conflict of interest rules for those that are going to be serving on the board of directors? In addition to the board, we like the concept of having an advisory committee or advisory committees, representative of different purchasers of insurance, small business people, agents and brokers, and others who are currently involved in the health insurance marketplace.”

Lois Wagh Aronstein, AARP New York State Director explained, “It is imperative that the Governor and Legislature act now to establish a Health Exchange that negotiates the best insurance rates and has strong conflict of interest provisions.”

“There are 2.6 million uninsured New Yorkers and approximately 500,000 are between the ages of 50-64. Access to health coverage during midlife takes on growing importance for AARP members and consumers who face rising health costs and may be more likely to need health care. While AARP is encouraged that New York has moved forward to establish a Health Benefit Exchange, delaying important decisions by requiring multiple studies may not serve New Yorkers well. With just two and a half years to establish one of the nation’s largest health insurance exchanges, New York needs to hit the ground running. New Yorkers deserve to be confident that the state’s Exchange is carrying out its important work without any conflict of interest and that it is working to achieve the best value for people buying insurance.”

The current bill as it stands provides certain protections meant to assist individuals in using the Exchange. For example, the Exchange would operate a toll-free telephone line to assist consumers and an Internet website containing standardized comparative information on qualified health plans. The website will feature a calculator allowing individuals to determine the actual cost of coverage. The Exchange would establish a program to award grants to entities to serve as “navigators” to help educate consumers and facilitate enrollment.

In addition, the Exchange will include a Small Business Health Options Program (“SHOP”), which will assist small employers in facilitating the enrollment of their employees in qualified health plans offered in the group market, according to Senator Seward. Until January 1,2016, a “small employer” will be defined as an employer with an average of less than 50 employees. On January 1, 2016, the term will apply to employers with an average of up to 100 employers. Under this bill, and as permitted under federal law, the Exchange will consider whether to expand the definition before 2016.

The Exchange would be financially self-sufficient by January 1, 2015, according to Senator Seward. The Exchange would conduct a study on how to become self-sufficient by January 1, 2015 and post all revenues and expenses on its website. The proposal would prohibit all general fund or special revenue fund monies that are not federal funds specifically earmarked or awarded to New York State for implementing the exchange from being sub-allocated or transferred to the Exchange. It would be prohibited any money from being transferred from the Exchange’s account to the general fund or any special revenue fund. The Exchange’s implementation is contingent on there being sufficient and available federal financial support to operate the Exchange.

While the PPACA requires each Exchange to be self-sustaining by January 1, 2015, federal funds will support the planning, implementation, and operation of the Exchange through December 2014. New York has already received an Early Innovator Grant of $27 million and an Exchange Planning Grant of $1 million.

Said Senator Seward, “If the federal Affordable Care Act legislation is ruled unconstitutional or no longer exists, under the provisions of this bill, obviously if there is no federal funding available, the exchange cannot go on, but it calls for the legislature to reconvene within 180 days because to make a decision in terms of the future New York health benefits exchange. If the federal law is struck down, it will trigger a review by the Legislature in terms of what to do next.”

The Superintendent of Insurance (Department of Financial Services after October 3, 2011), Benjamin Lawsky, and the Commissioner of Health would be allowed to apply for, receive or spend money designated for establishing the operation of the Exchange until the Board of Directors is appointed and holds its first meeting.

Blair Horner, Vice President for Advocacy, American Cancer Society of NY & NJ has disapproved of the Senate’s failure to pass the Exchange legislation.

Said Horner, “The American Cancer Society urges New York lawmakers curb their interest in re-debating federal law and instead focus on what uninsured New Yorkers need most, access to health insurance. Every year, as many as 10,000 New Yorkers face a diagnosis of cancer without health insurance. One-third of cancer survivors report losing health insurance at some point after their diagnosis. There is a direct relationship between insurance status and individual’s chance of surviving cancer. While they may be Democrats, Republicans or Independents, New York’s cancer patients and their families are united in their fight to survive their disease without financial ruin. Health benefit exchanges established under federal law offer the best hope of making available to all insurance coverage for the lifesaving medical care they need.”

“While some may wish to re-debate the Congressional vote, it is important to examine the real world consequence of failure to comply with the directive to establish an exchange in New York State:

Millions of dollars in federal aide could be lost. As part of the federal law, states may apply for up to $100 million in federal aid to cover costs of health-exchange start-up. Only states that have enacted a governance statue may access these federal funds.
Timing is short. If New York waits to pass a health benefits exchange bill, the exchange may not be functional in time. New York must demonstrate that its exchange is largely operational by January 2013 to obtain federal approval. Eighteen months is a short time-frame to set up the infrastructure to operate a successful exchange.
The federal government will set up a one-size-fits all exchange anyway. Under federal law, if New York’s exchange doesn’t meet the January 2013 deadline, the federal government will set up the health care exchange in New York. However, such an exchange will likely not be sensitive to the regional and demographic differences within the state.
New York has already received grants to implement federal law. Over $46 million in federal grants to plan aspects of health care reform have flowed into New York, including a $27 million Early Innovator grant to establish an IT model for the exchange.”

Duncan Davie, Counsel to Senator Seward, the Legislature will be coming back probably within a month to eight weeks, but whether the Exchange bill will be the center of discussion is to be decided. Senator Hannon said Legislature will be coming back for discussions, “Within the eight weeks, at most, but that is not hard and fast.”

“Health Exchange” Bill Moves, then Slows in N.Y. Legislature

Betty Flood