The Daily Q: What happens if New York fails to create a health insurance exchange?

It’s coming down to the wire: New York State has about three months to create a state-sponsored health care insurance exchange as part of the federal Affordable Care Act. Currently both Gov. Andrew Cuomo and the state Assembly are in favor of a bill that would create an exchange, while Senate Republicans say they need to first form a commission to study options.

A health insurance exchange is a marketplace through which consumers can purchase insurance, compare different providers and learn about publicly subsidized programs. If the state legislature can’t create an exchange by the end of June’s legislative session, it’s doubtful that the state will meet the federal deadline to have an exchange in place by the beginning of 2013.

At the New York World we wanted to know: What would happen if New York State misses the deadline for creating a health insurance exchange?

We asked Mark Scherzer, senior counsel at New Yorkers For Accessible Health Coverage, a coalition of voluntary health organizations serving people with disabilities.

How far along is New York State in creating an insurance exchange?

Not very far, unfortunately. There was legislation in 2011, which got signed on by the Republican chairs of the Health and Insurance committees as well as from the Democratic Assembly and the Governor’s Office to create an exchange. But a number of Republican Senators balked at the last minute in creating something that they thought would further Obamacare. So it didn’t pass last year. The Governor put a very similar bill to what was agreed to on last year in his budget bill for this year but it’s not clear whether it’s going to be in the budget as enacted because, again, some Republican Senators are claiming that we shouldn’t do it.

Is there anyway the Governor could circumvent the Senate?

The Governor could perhaps create an exchange through executive order. He could do it within the structure of state agencies, but he couldn’t create an independent authority that way, which all stakeholders seemed to agree was probably the best way to go. We need to have it somewhat freed from government procurement restrictions, somewhat more independent of government, in-between public and private.

It looks like this needs to be done really soon if it’s going to happen at all.

It really does. If they put it off to the fall there’s no way it’s going to be ready to go by January 2013. They also have to show that it’s operational before the January 2013 deadline. I mean, there’s a lot to be done. There’s a tremendous number of decisions to be taken. And I think some of the people who are opposed are pegging their hopes on the Affordable Care Act being invalidated by the Supreme Court as unconstitutional.

What happens if the state can’t pass a bill to create the exchange?

You don’t get penalized but you get the federal government operating the exchange for you. And there are a number of issues there that are a great concern. Among them: whether the federal bureaucrats will be sensitive to particularities of New York State law, which are an outlier in many ways. We have rules that are very different from most all other states for things like a community rating, meaning everyone pays the same price for their insurance regardless of their age, health, sex, etc. This is different from every other state. We have huge public programs that we want to have integrated in terms of enrollment with the exchange so there’s sort of like a one-stop shopping for people and families who are split between public and private coverage. Issues like that make it important that we operate our own exchange that is responsive to issues on the ground here.

What kind of difference will the Affordable Care Act make for health care consumers in New York?

New York was in many ways ahead of the curve. Important reforms that were enacted by the Affordable Care Act, we already had in New York. Like the ability for individuals to buy coverage regardless of their health without being penalized in terms of premiums. That’s a big deal in New York and it’s not in most other states. So the rest of the country will look more like New York. What will be different is we’re going to have a million plus extra people insured than we have now. So it will be a much bigger market, and the result of the influx will be a substantial reduction in premiums for the individual and small group markets. What we have now is a situation where people who need insurance are more likely to buy it, and they have higher average costs than the people who feel they don’t need insurance because they’re healthy.

Who loses out in a health exchange?

I don’t think anyone does. That’s why it’s so puzzling to see the opposition staking its ground here. If they don’t enact the exchange we’ll still have the individual mandate, which is the most controversial part of the law. So it will just be the mechanism to channeling people to coverage. It will just be the federal government rather than by New York State. Jim Seward, the Republican head of the Senate Insurance Committee, an extremely conservative guy who does not like regulation. He was quoted as saying back in January that whether or not there’s reform we should do an exchange. It’s a creation of a marketplace that’s consumer-friendly. It’s hard to understand why there’s a constituency opposing it other than to be obstructionist about the law in general.

This interview has been edited for length and clarity.

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