Countdown to NJ's Health Insurance Exchange

2012 is the year that the first major components of the federal Affordable Care Act will be put in place nationwide. The top priority, at least in New Jersey, is to develop a health insurance exchange -- a virtual marketplace that will let individuals and small businesses comparison shop for coverage.

Trenton needs to get the job done by June 30, which is the deadline to apply for an estimated $5 million in long-term federal grants to actually implement the government-mandated insurance exchange.

Health insurance exchanges are a key part of federal healthcare reform. Supporters believe that if exchanges are done right, they could broaden health insurance choices and simplify the decision-making process. Some advocates argue that online insurance exchanges can reduce the cost of health coverage, though that point is definitely in contention.

In 2010, New Jersey received an initial $1 million federal grant that has funded an extensive planning process directed by the state Department of Banking and Insurance. The Rutgers Center for State Health Policy (RCSHP) was commissioned by DOBI to evaluate various policy options the state must address as it designs an exchange, and to convene forums of stakeholders -- healthcare providers, insurance companies and brokers, consumer advocates, and business groups -- to gather their views on what the exchange should look like.

The center, led by director Joel Cantor, has held more than a dozen stakeholder forums over the past few months. Those gatherings have resulted in at least one key point of agreement: New Jersey should create and run its own exchange. If it doesn't, the federal government will step in and run the exchange for the state.

"Failure to plan," said Marshall McKnight, spokesman for the DOBI, "means ending up with a federal exchange by default. By planning, we're keeping New Jersey's options open." Some close to the process also believe that a state-run exchange will simpler for individuals and small businesses to use.

At the same time, RCSHP has identified major points of disagreement among key stakeholders. Consumer advocates, including New Jersey Citizen Action, want the exchange to be an "active purchaser" that negotiates with health insurers to bring down the cost of coverage. Said Jeff Brown, Citizen Action healthcare campaign coordinator, "We want the board [that governs the exchange] to be able to actively negotiate with insurance companies for the best prices for consumers."

But health insurers and brokers want the exchange to be an open clearinghouse, where health plans market policies and compete for customers. Ward Sanders, president of the New Jersey Association of Health Plans, said any health plan licensed in New Jersey ought to be free to sell policies on the exchange, and let the marketplace determine pricing.

"The vast majority of the healthcare premium dollar goes to provide healthcare, and there is nothing about the exchange that is going to change that." He said health plans already use their leverage to negotiate rates with hospitals, doctors, and other care providers, and if the exchange steps into the marketplace as an active purchaser, plans that can't meet its pricing targets might be shut out of this new marketplace. "And if you are a plan that gets shut out of the exchange, you have to wonder why you're doing business in the state," Sanders said.

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