Arkansas Moving Forward With Hybrid Federal-State Health Insurance Exchange

When Insurance Commissioner Jay Bradford “quashed” plans for a state-run health insurance exchange in early December, he noted that Arkansas would join a federal program with little local input.

Not so fast.

It turns out Arkansas is pushing to join a “hybrid” federal-state model that was created in part by the U.S. Department of Health and Human Services (HHS) in response to states not being able to structure state exchanges in the last year.

“When they realized so many states weren’t going to develop state-run exchanges, they moved to this to provide some state input,” said Alice Jones, spokesperson for the Arkansas Insurance Department.

Under the hybrid model — known as the Federally-Facilitated Health Benefit Exchage (FFE) — states would have some flexibility and control over insurance plan selection, rating, monitoring and limited oversight, Jones said. However, there will be no local consumer call center to address Arkansans’ problems. They will be referred to a federal call center for resolution.

In essence, health exchanges were outlined in the controversial Patient Protection and Affordable Care Act signed into law in early 2010. Exchanges are a marketplace for comparing private insurance plans that would primarily serve individuals and small businesses seeking health insurance options. States could ultimately choose to include larger employers in exchanges, which must be up and running by 2014.

REQUEST FOR FEDERAL FUNDS
Arkansas is hoping to receive $7.66 million from the feds for the hybrid program. Money from that grant would help determine cost estimates for state participation in the FFE, Jones said. She added that the goal of getting federal funding is to keep Arkansas from spending state dollars.

“Without federal establishment funding, there will be costs to the state with the FFE,” she warned. A timeframe for hearing from the federal government could be months away.

So far, Arkansas has only received $1 million for an initial exchange planning grant. It was the subject of a heated budget debate in the last legislative session, which almost saw the entire Arkansas Insurance Department budget rejected.

The $1 million received and the $7.66 million requested is a pittance compared to other state’s requests.

To date, nearly $729.5 million has been awarded to states for health exchange planning, establishment and innovator grants. This chart, provided by the Insurance Department, highlights each state’s awards so far.

Some states have requested no grant money, while states like Arizona, California, Massachusetts, and Wisconsin have received tens of millions of dollars.

Arkansas’ sister states have received as little as $998,416 (Louisiana) and as much as $55.5 million (Oklahoma).

LETTERS CIRCULATE
Gov. Mike Beebe (D) revealed on Dec. 22 that he sent a letter to HHS supporting the state’s request to join the hybrid effort.

“This partnership will allow us to apply for federal money that will permit us to meet our legal requirements using as little state funding as possible,” Beebe said in December. “It will also help to ensure that, as more Arkansans sign up for health-insurance programs, the premium taxes collected on those policies remain in Arkansas and don’t go to Washington.”

“Insurance options are best modeled with local needs and perspectives in mind, and this partnership program will give Arkansas a voice in that process, even with the federal government in control of this exchange,” Beebe added.

Rep. Reginald Murdock (D-Marianna) circulated a letter this week among House colleagues encouraging them to support the FFE.

“We missed our first opportunity to prevent the federal government from having complete control over the implementation of our Health Exchange,” Murdock wrote. “Now Arkansas has another opportunity… The Federally-Facilitated Health Benefit Exchange Partnership Model will allow us, as most states are doing, to have some input into the implementation of our Health Exchange.”

Murdock stressed 4 key points about the FFE Partnership in his letter:
1) There is a cooperative agreement and federal funding for planning Exchange functions that Arkansas is best suited to perform;
2) There is no ‘pay-back’ requirement if Arkansas decides to choose a wholly federally-facilitated Exchange after studying the FFE Partnership Model;
3) Partnership funding will assist the Arkansas Department of Human Services (DHS) with planning Medicaid interfaces needed to connect with the federal enrollment/eligibility portal;
4) If parts of the current law are struck down by the Supreme Court, FFE Partnership funding will have helped Arkansas improve our systems at the Arkansas Insurance Department and DHS.

But some House members who have been skeptical of the state push on federal health care reform from the beginning expressed reservations with the latest plan.

Rep. David Meeks (R-Conway) questioned the need for the FFE hybrid approach in light of a year-long legislative debate and a looming U.S. Supreme Court decision.

“The Fed-State Partnership is just a repackaging of what a bipartisan group of legislators already rejected,” he said. “There is no reason to move forward on an exchange when the law will most likely be found unconstitutional and overturned by the Supreme Court later this year.”

In the 2011 regular session, Meeks filed two bills to deal with health care reform. One bill, HB 1053, would have prevented mandatory enrollment for health insurance — a linchpin of the federal health care reform law.