Without federal law, some pieces of health reform could continue in Connecticut

Connecticut officials are working to create a new health insurance market that will open next year, hire a CEO to run it and prepare for an influx of new Medicaid recipients by 2014.

In effect, they're racing to implement a law that might not exist for long, at least in its current form.

But those involved in putting federal health reform into action say that Connecticut isn't likely to stop moving forward on a major piece of the act, regardless of how the law fares before the U.S. Supreme Court or under a new Congress after this fall's elections.

"I think if there were to be some major change, such as the [act] was rendered unconstitutional and therefore removed, that we would be far enough along down the line that we would have a lot of what we need in place," said Jeannette DeJesús, special adviser to the governor for health reform.

In particular, the creation of a marketplace for buying insurance coverage, known as a health insurance exchange, could happen even if the federal law is altered substantially, those planning the state's exchange say. Connecticut has already received more than $7 million in federal funds to develop the exchange, and is expected to have applied for most or all necessary federal start-up money by June, when the Supreme Court ruling is expected.

By the time there's a new Congress, which could try to repeal or de-fund the law if Republicans win the House and Senate, "Hopefully Connecticut will have gotten its big grant award by that time and will kind of be off to the races," said Mickey Herbert, a member of the exchange board and former CEO of the insurer ConnectiCare.

And there's likely to be political interest in continuing to build the exchange, even if the federal law is overturned or scaled back.

"I believe that the governor believes that the insurance exchange is a very viable approach to increasing access to health insurance, and we would certainly undertake every effort to find a viable ... state-funded and independent state model for operation of the health insurance exchange," said Office of Policy and Management Secretary Benjamin Barnes, Gov. Dannel P. Malloy's budget director.

But the Supreme Court ruling and the elections could still have significant implications for health reform in Connecticut. Major alterations to the act could make many changes difficult or unaffordable, including a federally funded expansion of Medicaid, insurance market reforms and subsidies to help people buy coverage through the exchange.

"It would not mean the end of health reform for us here in Connecticut," DeJesús said. "It would cause us to lose considerable ground in the reforms that we're undertaking with insurance, and I think that the biggest consequence for folks in Connecticut and across the country would be coverage."

The potential for health reform even without the federal law reflects in part the differences between Connecticut and many other states.

While 28 states have challenged the health reform law, in Connecticut, the fight has largely been over whether to go beyond the federal requirements, including by creating a state-run insurance plan to compete with private insurers. State leaders who resisted those requests embraced the federal law instead. Under a Republican governor, Connecticut was the first state to expand Medicaid eligibility after the reform law passed, getting an early start on coverage expansion that all states must make by 2014. Under Malloy, a Democrat, it became among the first to pass a law establishing a health insurance exchange.

More than the mandate

The Patient Protection and Affordable Care Act, passed in 2010, is perhaps best known for its most controversial feature, the requirement that nearly all Americans have health insurance. The coverage mandate is the subject of the challenge to the act being heard by the U.S. Supreme Court next week.

But beyond the mandate, the law has several key components, including an expansion of health insurance coverage, new insurance rules and funding for pilot programs aimed at changing how health care is delivered.

The coverage expansion includes the state-based exchanges, which are expected to sell mostly private health plans. States must also expand their Medicaid programs to cover adults earning up to 133 percent of the poverty level beginning in 2014, and will do so largely on the federal government's dime.

Some of the insurance reforms have already taken effect, including requirements that health plans cover preventive care with no out-of-pocket costs to members, allow young adults to be covered on their parents' plans until turning 26 and eliminate lifetime coverage limits. Insurers must also spend at least 80 percent or 85 percent of the money collected from premiums on medical care and quality improvement activities, or issue rebates to members beginning this year.

Other insurance regulations will roll out in the coming years, including those requiring insurers to cover adults with pre-existing conditions (they must already cover children) and limiting the factors an insurer can use to determine premium rates. In addition, all insurance plans will have to cover certain "essential" benefits, and there will be limits on members' out-of-pocket costs.

If the Supreme Court determines that the coverage mandate is unconstitutional, it could rule narrowly and leave all or most of the rest of the law intact. Or it could strike the entire act. The latter would mean the end of the insurance regulations, as well as federal funding to cover the cost of expanding Medicaid coverage.

In theory, states could expand Medicaid coverage without the federal reform law, but they'd have to do so without the extra federal cash.

Connecticut officials have already balked at the cost of providing Medicaid coverage to the poor adults who became eligible after health reform passed. For them, the federal government will pay half the cost of coverage until 2014, when it picks up the full tab. The Malloy administration is seeking to scale back eligibility and benefits in the interim, although the move has been met with skepticism from legislators.

Connecticut could also pass its own laws to restore the health reform law's insurance regulations if they're struck down, said state Healthcare Advocate Victoria Veltri.

"I really don't see us looking back when it comes to prevention," she said.

Doing so would have less effect than the federal law, however, because self-insured plans used by most large employers are not subject to state regulation.

Exchange planning

Exchange board members said they're making plans as if the law will remain unchanged.

States have a tight timeline for creating their exchanges, which must be ready to enroll members in plans by October 2013. Getting there requires a host of policy decisions, including what benefits each plan must cover, as well as developing customer service functions to help people compare and select plans, and gathering and reporting data. Each state's exchange is required to be financially self-sustaining by 2015.

DeJesús noted that Massachusetts created an exchange and near-universal coverage without help from the federal government.

But Barnes and Herbert said a ruling against the individual mandate, or a loss of funding to give people subsidies to buy coverage through the exchange, could be problematic. The health reform act provides for federal subsidies for people earning up to 400 percent of the poverty level -- $92,200 for a family of four.

"I expect we will be able to continue with the development of the structure of a health insurance exchange regardless of what comes out of [the Supreme Court] decision," Barnes said. "I think I'm more concerned about the elimination of the subsidy down the road, and frankly, if the mandate goes away, then it's unclear how effective the insurance exchange is going to be at bringing people in and being a force for cost control."

Herbert said the exchange subsidies could be a prime target for Republicans seeking to scale back the law.

"The biggest single item in the Affordable Care Act where you could cut it to save money or reduce it would be the premium subsidies that enable people to purchase coverage through the exchange with their premiums subsidized by the federal government," he said. "The exchange ... probably wouldn't be fatally wounded, but it would be grievously wounded by that because not as many people would sign up, because presumably they couldn't afford to."

Veltri, who is on the exchange board, noted that the state has other bodies working on changes to the health care system, including a cabinet established as part of a compromise on last year's proposal to create a state-run health insurance plan called SustiNet. She said the federal reform law could serve as the catalyst for changes that could occur with or without it.

"Our thought process is, well, the Affordable Care Act was the thing that got us thinking this way, that we'll stay on this road no matter what happens with the Supreme Court decision and no matter what happens with the election," she said.

Editor's note: More information on the health care law is available at http://www.kaiserhealthnews.org/Stories/2012/March/15/supreme-court-curtain-raiser.aspx