Health Exchange Head Start Reaps Dollars

By: - March 22, 2011 12:00 am

In late 2009, Kansas was in the midst of efforts to fix its crumbling Medicaid information technology. Then it got a gift. A few months later, the new federal health care law passed. Because Kansas was already dealing with the IT issue, it earned the title of “early innovator” from the federal government, and was chosen as one of seven states to share $241 million in grant money from the U.S. Health and Human Services Department (HHS). Now it is only weeks away from hiring a contractor to design and build its health insurance exchange far ahead of federal deadlines.

“We got a year’s head start on most states,” says Linda Sheppard, Kansas’ national health law chief. “We’ve agreed to share about anything and everything that we can about our plans to try to help them avoid spending a year getting to where we are now.”
The purpose of the “early innovators” program is to guide other states in developing the backbone information systems that will drive state-level health insurance exchanges. The improved technology is supposed to assist them in getting an exchange ready for federal approval in 2013. Some of those that are only beginning to get their IT operations ready are going to have a tough time meeting the deadline.  
To qualify for federal approval under the exchange provision of the law, a state must create a user-friendly Web site where individuals and small businesses can compare insurance policies, sign up for Medicaid and federal tax subsidies and purchase policies by January 1, 2014. The system must include all state eligibility rules and connect to state and federal tax records so that consumers can immediately determine whether they qualify for subsidies.
It’s a tall order. And if a state’s system doesn’t pass inspection, the federal government will create an exchange for it-something governors have said they want to avoid. It’s to forestall federal intervention that the “innovator grants” were included in the law. But some of those close to the situation are worried about how it will play out.
“What if the innovator’s systems don’t work?” asks Rachel Morgan, health care analyst with the National Council of State Legislatures. “The concern is there’s no plan B for a plug in IT infrastructure. They’re setting states up for failure. They’re not giving them enough time.”
Aware of the time crunch, HHS has scheduled a meeting in Washington next week, where officials from the seven innovator states-Kansas, Maryland, Massachusetts, New York, Oklahoma, Oregon and Wisconsin-will meet to decide how and when they will make their plans available to other states.
Aided by the promise of federal help, Kansas has been working on its system for the past year, and officials there say they are ready to begin sharing their technology immediately. That includes specifications for the look and feel of the state’s proposed insurance exchange Web site, and a so-called “logic model” that will dictate how the back end of the system works. Within the next few weeks, Kansas is expected to hire a contractor to do the actual web site design, and plans to share more details at that time.

How were the seven states chosen?

Like Kansas, each of the innovator grant-winning states had a head start in creating the backbone for an insurance exchange. Some were easy choices. Massachusetts, which passed its own statewide universal health care law in 2006, had an exchange, called the Commonwealth Connector, that was already fully operational. HHS offered a grant to the University of Massachusetts Medical School to expand the state’s existing system so that individuals and small businesses in Connecticut, Maine, Rhode Island and Vermont can use it to price-compare and purchase insurance plans in 2014.
Oklahoma had already built an online Medicaid application system that employed instant verification; New York had a state-of-the art Medicaid payment processing and data collection process; and Wisconsin had recently embarked on a new Medicaid information program designed to include the state’s Children’s Health Insurance Plan and other social welfare benefits.  Oregon has a project underway that uses off-the-shelf software to create a modular, reusable IT framework aimed at ensuring that low-income consumers do not experience gaps in insurance coverage as their incomes shift.
For states that didn’t receive innovator grants, the next step will be federally funded “establishment grants,” which will cover the full cost of creating an insurance exchange. Under the national health care law, Congress provided open-ended funding for establishment of the envisioned insurance Web sites, although states will be required to cover the operating costs once the systems are up and running. 
So far, every state has received a $1 million planning grant and many have applied for establishment grants, which will be awarded on a rolling basis throughout this year. But for “early innovators,” extra money has already arrived. Oklahoma has received $55 million; Oregon, $48 million; Wisconsin, $38 million; Massachusetts, $36 million; Kansas, $32 million; New York, $27 million; and Maryland, $6 million.
In three of the states-Kansas, Oklahoma and Wisconsin-new Republican governors oppose the federal law and are suing the federal government in the hopes of overturning it. Still, all three governors accepted the federal awards, because an appeals judge has ruled that until the U.S. Supreme Court makes a decision in the case, states are obligated to implement the law. 

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Christine Vestal

Christine Vestal covers mental health and drug addiction for Stateline. Previously, she covered health care for McGraw-Hill and the Financial Times.