White House Extends Deadline for States to Set Up Health Insurance Exchanges While Health Insurance Premiums Rise

As the White House grants more time for the states to establish health insurance exchanges, health insurers are seeking (and receiving) double-digit rate increases.
The White House has agreed to give states more time to set up the health insurance exchanges mandated under the Obama administration's health care law.

The HHS is waiving or extending the January 1, 2013, deadline for states to set up health insurance exchanges.
The deadline to establish a viable health insurance exchange under the law was January 1, 2013, but the Secretary of the federal Health and Human Services Department, Kathleen Sebelius, has indicated that "she will waive or extend the deadline for any states that expressed interest in creating their own exchanges or regulating insurance sold through a federal exchange," according to the New York Times.[1]
The exchanges are a crucial element of President Obama’s health care law. Every state is supposed to have one by October, and most Americans will be required to have coverage, starting in January 2014. The federal government will run the exchange in any state that is unwilling or unable to do so. It now appears that federal officials will have the primary responsibility for running exchanges in at least half the states — far more than expected when the law was passed in 2010.[2]
Thusfar, the HHS has given "conditional approval" to 17 state-created health insurance exchanges even though some of those states had not granted clear legislative authority or funding to actually run the exchanges.[3]

The Obama administration has indicated that, rather than determining whether these 17 state-run exchanges are viable as of the deadline set in the law, the federal government will continue to work with the 17 states to set "timelines and milestones for progress toward creation of an exchange."[4]

HHS has suggested that states could operate a health exchange "in partnership with the federal government" despite the lack of authority for such a partnership in the health care law.
HHS continues to encourage other states that have not yet created an exchange to cooperate with the White House, granting states until February 15, 2013, to file an application to operate an exchange "in partnership with the federal government." But some have argued that the health care law does not authorize either "conditional approval" of an exchange or an "exchange partnership" with the federal government as the HHS seems to be promoting.[5]

Federal officials are also allowing extra time to other states that might cooperate with the White House to some degree. Ms. Sebelius told states they had until Feb. 15 to file applications to operate exchanges “in partnership with the federal government.”[6]
A political benefit of this strategy is that it allows the administration to keep working with even the most recalcitrant states. Administration officials said they were trying to persuade such states to share the work of running an exchange, supervising health plans and assisting consumers.[7]
While the federal and state governments continue to negotiate on health insurance exchanges, health insurance premiums for consumers may continue to rise.

Health insurers are seeking and winning doubt-digit increases in premiums for some customers.
The New York Times reported last week that health insurance companies "across the country are seeking and winning double-digit increases in premiums for some customers, even though one of the biggest objectives of the Obama administration's health care law was to stem the rapid rise in insurance costs for consumers."[8]
Particularly vulnerable to the high rates are small businesses and people who do not have employer-provided insurance and must buy it on their own.[9]
At least one health insurer in California has proposed rate increases of up to 26%, while other insurers have proposals for increases up to 22% and 20%.[10]
In other states, like Florida and Ohio, insurers have been able to raise rates by at least 20 percent for some policy holders. The rate increases can amount to several hundred dollars a month.[11]
Some people may be delaying health care treatment because of the weak economy.
The Times article points to evidence that the increase in overall health care costs appears to have slowed in recent years, "increasing in the single digits annually as many people put off treatment because of the weak economy." The insurers, on the other hand, argue that medical costs for certain policyholders are rising much faster than the overall average.[12]

Federal regulators suggest that, although health insurance premiums may be increasing, the increase would be even higher without the health care law, in part because it "sets limits on profits and administrative costs and provides rebates if insurers exceed those limits."[13]

Some health insurers may be more afraid of losing money by charging inadequate premiums than having to refund some of that money.
While some consumer advocates suggest insurers may be seeking large rate increases in spite of the refund provisions – "they may be less afraid of having to refund some of the money than risk losing money" – even some state insurance regulators agree that rising health care costs are driving the rate increase requests. This is in part because of the process of medical underwriting, which also limits the availability of health insurance to those with pre-existing conditions, according to the Times.[14]
…[B]ecause insurers now take into account someone’s health, age and sex in deciding how much to charge, and whether to offer coverage at all, people with existing medical conditions are frequently unable to shop for better policies.[15]
As the Times article notes, however, the health care law will prohibit insurers from considering the health of a prospective policyholder before offering coverage, or deciding what rate to charge, in 2014.[16]

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