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Walker won’t create health care exchange, defers to feds

Nov. 17–Gov. Scott Walker joined 14 other GOP governors in turning over to the federal government the task of setting up an online insurance marketplace called for under the Affordable Care Act, prompting an outcry from Democrats and consumer advocates and praise from fellow conservatives.

The reaction from health insurers, business groups and other stakeholders — who had pushed for the state to set up its own marketplace, or exchange — was muted.

Walker’s announcement, which was expected, came less than 24 hours after President Barack Obama’s administration gave states such as Wisconsin more time to decide whether to set up the exchanges .

In a letter Friday to U.S. Health and Human Services Secretary Kathleen Sebelius, Walker argued that Wisconsin has been able to provide health insurance to more than 90% of state residents without a health care exchange; wouldn’t have enough freedom to design the exchange under federal rules; and could face undisclosed costs to Wisconsin taxpayers by running the exchange itself.

The state would comply with the federal law where required, he said.

“No matter which option is chosen, Wisconsin taxpayers will not have meaningful control over the health care policies and services sold to Wisconsin residents,” Walker wrote. “If the state option is chosen, however, Wisconsinites face risk from a federal mandate lacking long-term guaranteed funding.”

Under the law, the exchanges must be self-sufficient and will be funded by a tax, or assessment, on health insurance companies. But the tax will be imposed whether an exchange is run by a state or the federal government.

The exchanges — a key component of the Affordable Care Act, commonly known as Obamacare — are intended to make it easier for people and small businesses to shop for health insurance.

Individuals and families who do not receive affordable health benefits through an employer and small business with fewer than either 50 or 100 employees will be able to buy insurance through the exchange.

The exchange also will be the portal for determining whether people are eligible for federal subsidies to buy commercial health insurance.

A coalition of business groups, health insurers and Democrats had pressed Walker — an opponent of the Affordable Care Act — to have Wisconsin create its own exchange. Yet with tea party conservatives opposed to advancing the law in any way and many guidelines still unissued by the federal government, Walker gradually moved from the state’s overseeing the exchange to Friday’s flat opposition.

In a conference call with reporters, Walker said that he preferred state-run programs “just instinctively as a states’ rights issue” but didn’t feel he had enough control to put into place his conservative vision of a free-market exchange.

Nationally, 23 states and Washington, D.C., as of Friday planned to set up exchanges on their own or partner with the federal government while 12 states had yet to make a decision.

Walker declined to say whether he would back a future expansion of the Medicaid program called for under the Affordable Care Act, noting he was still considering the question.

Adults with incomes below 138% of the federal poverty threshold — $15,414 for one person — now not covered by Medicaid programs would be eligible for coverage through the program under the federal law, with the federal government paying for 100% of the cost of insuring them through 2016, declining to 90% by 2019 and thereafter.

Under the U.S. Supreme Court’s ruling on the law last summer, however, states have the option of not expanding their Medicaid program.

Walker noted that the cost of the expansion in Wisconsin would be less than in other states because the state’s Medicaid program already covers many people with incomes below the threshold.

Walker declined to state specific areas where the state needed more control, saying he was not “dissecting it here today.” He also could not provide an estimate of the future costs the state might face, referring the question to his staff.

J.P. Wieske, a spokesman for the Office of the Commissioner of Insurance, said a state-run exchange must be self-sufficient once it’s operational and its cost would be paid by fees on the plans sold through the exchange or taxpayers.

The costs will include staff to run the exchange, maintaining the website and call center, overseeing the information technology system and paying for staff, known as navigators, to help consumers.

The state Department of Health Services estimates the costs of running an exchange at $45 million to $60 million a year.

Robert Laszewski, a consultant and former health insurance executive who writes a respected blog, the Health Policy and Marketplace Review, does not see how states would face more costs by running their own exchanges.

“The way the thing is structured, it is financed by an assessment on the insurance companies,” Laszewski said. “So I don’t understand his reasoning at all.”

The bigger risk, he said, is that states will not be able to get their exchanges up and running by 2014.

“Many people think the smart move on the part of Republican governors is to let the feds take the risk — which is a huge risk,” Laszewski said.

He also noted that states will have the option of taking over control of the exchanges in future years.

Democrats and consumer groups immediately criticized Walker’s decision on the exchange as a lost opportunity for the state to control its destiny in one of the key sectors of its economy.

“I joined others in reaching out to Governor Walker and made it clear I was committed to working with him to advance health care reforms that work for Wisconsin,” U.S. Sen.-elect Tammy Baldwin said in a statement. “Instead of leading and working together to move a ‘made in Wisconsin’ health insurance marketplace forward, Governor Walker chose to pass the buck and reject the opportunity to take ownership of this issue.”

Robert Kraig, executive director of the liberal group Citizen Action of Wisconsin, said the governor had caved in to the tea-party wing of his party to preserve their future support.

“It is astounding that Walker is putting the demands of ideological extremists over the interests of health care consumers across Wisconsin who need access to quality affordable health care options, ” Kraig said in a statement. Wisconsin Manufacturers Commerce, the National Federation of Independent Business and groups representing the state’s health plans, doctors and hospitals had all backed state-run exchanges, but their immediate reaction to Walker’s decision Friday was more restrained.

“While WMC supported the creation of a Wisconsin-specific exchange, we acknowledge that Governor Walker makes a good case for not doing so,” WMC President and Chief Executive Officer Kurt R. Bauer said in a statement.

Phil Dougherty, deputy director of the Wisconsin Association of Health Plans, which represents health plans based in the state, said, “Our message is we are moving forward and we will work with Wisconsin stakeholders to encourage the adoption of standards that suit Wisconsin.”

One priority for the association is ensuring that the exchange includes regional health plans.

“We have some of the top quality health plans in the country,” Dougherty said, “and they are all regional plans.”

Supporters of a state-run exchange had contended that it would allow for more input from stakeholders and consumers than one run by the federal government.

Republicans such as U.S. Sen. Ron Johnson of Oshkosh and incoming state Assembly Speaker Robin Vos of Rochester applauded Walker’s decision.

“By not creating a state health insurance exchange, we’re protecting Wisconsin taxpayers from what could ultimately become a major financial catastrophe,” Vos said in a statement.

In his conference call, Walker contended that there would little difference between an exchange run by the state or one run by the federal government, because the federal government still would make all the important decisions.

The Affordable Care Act imposes a string of new regulations on health plans, such as requiring that they spend 80 cents of every dollar in premiums on medical claims and cover a package of basic benefits, ending annual and lifetime limits on benefits and limiting out-of-pocket costs.

But Laszewski and others contend the law also gives states a fair amount of flexibility in their setup of the exchanges.

For example, states would determine what plans can be sold on the exchange, what the plans must cover and how easily consumers will be able to compare health plans.

“There is a lot of flexibility here,” Laszewski said.

Some states such as California, which will pick plans sold on the exchange, will have more heavily regulated exchanges. Other states will have more market-oriented exchanges.

The Obama administration has said that it initially will set up exchanges that are less regulated and more in line with those likely to be set up by conservative governors, Laszewski said.

“They are saying they are going to do that at first,” he said. “They are not guaranteeing that three or four years down the road.”

That will limit the downside for Walker. Wisconsin and other states still have the option of taking over the exchanges. And in the meantime, the federal government will bear the risk of the exchanges up and running by late next year.

“Walker can always step in two or three years and take it over,” Laszewski said. “The smart thing for any Republican governor here is to pass.”

The Associated Press contributed to this report.

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