Pennsylvania Governor Plans State Insurance Exchange To Protect Subsidies

Governor Tom Wolf this week formally proposed setting up a state-based insurance marketplace, potentially protecting hundreds of thousands of Pennsylvania residents from the consequences of a Supreme Court decision that could gut Obamacare later this month.

A ruling against the Affordable Care Act could end insurance subsidies for millions of people who live in the 37 states – including Pennsylvania, New Jersey, and Delaware – that rely on the federal marketplace. The 13 that set up state marketplaces two years ago would not be affected.

Pennsylvania is one of two states to apply to set up an exchange. Delaware also submitted a “blueprint” application to potentially run a state-based exchange while continuing to rely on the federal government’s enrollment platform.

Governors in a handful of other states have discussed the idea but, in the face of extreme partisanship, are waiting for the court’s decision before stepping into a situation that all sides agree could create chaos for consumers, health-care providers, and the insurance industry.

“I think it will take an adverse ruling for anything to happen in these states, whereas Gov. Wolf has taken proactive steps,” Jennifer Tolbert, director of state health reform at the Kaiser Family Foundation, said Tuesday. There has been no public discussion of alternatives in New Jersey.

The highly anticipated Supreme Court decision revolves around whether the specific wording of the Affordable Care Act enables the federal government to use tax credits to subsidize insurance premiums for coverage purchased on an exchange operated by the federal government rather than the states. Without subsidies, the premiums would likely be unaffordable for many if not most of those who purchased coverage.

A ruling against subsidies would raise multiple unknowns, including whether it would take effect immediately. Although Republicans generally oppose Obamacare, there are fears of a backlash if millions suddenly lose coverage. If the court decided against the subsidies but delayed the effect of its ruling, it would give Congress time to negotiate with President Obama on a compromise.

Wolf, in a statement Tuesday, described his application for a state-based marketplace “as part of my contingency plan, in order to protect 382,000 Pennsylvanians from potentially losing subsidies that help them afford health-care coverage.”

But he said he was keeping all options open, including staying with the federal marketplace – or creating a state marketplace even if the court upholds subsidies.

Kaiser released an analysis Tuesday of the state-by-state impact of a decision against subsidies. The foundation estimated that 348,823 Pennsylvanians could lose an average of $227 a month. In New Jersey, 172,345 people could lose an average $313 monthly subsidy.

Discussion of a state marketplace had begun under former Democratic Gov. Ed Rendell but ended when Tom Corbett, a Republican and an opponent of Obamacare, was elected governor. While state-based exchanges allow for more local autonomy, several have struggled to stay afloat on premium assessments. The federal exchange works the same way, taking 3.5 percent.

“Our hope would be to do it for less than 3.5 percent,” said Ronald Ruman, spokesman for the state Department of Insurance.

Tolbert, the Kaiser analyst, said that technology was a huge cost for most of the state exchanges.

Pennsylvania has proposed using the federal technology already in place, now that it is operating smoothly. What it would have to pay for using it is not known. Pennsylvania also could save money by using the federal call center. But the acting state insurance commissioner, Teresa Miller, believes that “we could provide a better service,” Ruman said.

It is unclear whether the Republican-dominated General Assembly would have to approve Wolf’s proposal, although it does control funding.

Neither the administration nor Republicans in the legislature indicated any urgency in moving forward until the Supreme Court rules.

“There is no reason to deal with it right now,” said Steve Miskin, spokesman for House Republicans.

Jennifer Kocher, a spokeswoman for Senate Majority Leader Jake Corman, said the governor had not consulted with the legislature before announcing a month ago that he intended to apply to create a state-based marketplace, “so the efforts to work with us on this so far have been disappointing at best.”

Throughout the country, state decisions about many aspects of the Affordable Care Act, from expanding the Medicaid program to allowing certified “navigators” to assist people with subsidized insurance, have depended on which party was in control. Planning for a Supreme Court decision that could end subsidies faced the same hurdles in many states.

“I think a lot of this is politics,” Tolbert said.

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