Still facing much uncertainty, employers seeking a clearer picture of how health care reform will ultimately affect them under the federal Patient Protection and Affordable Care Act (PPACA) might consider looking closer to home: their state legislatures. 

Employers watchful as state-led strategies for health care reform evolve

Still facing much uncertainty, employers seeking a clearer picture of how health care reform will ultimately affect them under the federal Patient Protection and Affordable Care Act (PPACA) might consider looking closer to home: their state legislatures.

"Watch the states," says Jim O'Connell, Ceridian's executive consultant on health care reform. "This law gives major new responsibilities to the states. It's possible that while we're all focusing on Washington, D.C., health care reform will be shaped at the state level."

States are emerging as architects of the nation's new health care system, O'Connell says. A state-led strategy for health care reform will make it more important than ever for HR professionals to stay up to date on changes to health care reform legislation and to closely follow new developments as PPACA is implemented within their states.

State health insurance exchanges
In designing Health Insurance Exchanges as mandated by health care reform, states have an unprecedented opportunity to determine the future of health care. In these online marketplaces, individuals and employees of small businesses will be able to compare and purchase health insurance coverage. "The exchanges are one of PPACA's principal vehicles for expanding coverage to about 32 million uninsured Americans," says O'Connell.

If a state fails to establish an exchange system by 2014, the federal government will operate one in that state. In parts of the country with separate and distinct insurance markets, states will be allowed to form geographically distinct sub-exchanges, or even partner with neighboring states to structure regional exchanges. States have also been granted the authority to merge their individual and small-group markets to enhance the size and strength of their risk pools.

"Some states are looking at regional exchanges," explains John Hunter, vice president of Ceridian Exchange Services. "They're trying to find innovative ways to cover the uninsured population, and looking for solutions to lower costs and find the most effective delivery system."

Employer impact
A recent RAND report1 projects that health care reform is likely to increase the percentage of employees offered health insurance through their employers by 2016, mostly as a result of the new Health Insurance Exchange option for smaller companies that may not have offered group plans in the past.1

At first, only small businesses, which may be defined by the states as either fewer than 50 or fewer than 100 employees, will be eligible to purchase coverage through the small business exchanges. Employers may need to wait and see how their states choose to define a small business, especially if they have between 50-100 employees, to see if they will be able to participate in the small business exchanges.

Plus, beginning in 2017 and at the states' discretion, the small business exchanges could be expanded to allow large employers to participate. This development would add a third option to the "play or pay" provision that has received so much attention.

The possibility of using the small business exchanges may come as a welcome alternative for large employers. "We're noticing large employers are paying particular attention to the development of state exchanges," says Hunter. "It's possible the 2017 eligibility date for large employer groups might be moved up. Employers need to think about the possibility that those exchanges may make sense if their employees can find good coverage at a reasonable cost."

Because employers of all sizes have a significant stake in the design and success of state Health Insurance Exchanges, they may have to make difficult choices regarding their health insurance offerings in the next two to three years.

"For now, it is best to focus on compliance with current provisions, and to wait and see how health care reform unfolds in their states before making these important decisions," O'Connell says. "Employers have to remember that health care reform is a process, not an event."

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1RAND Health Technical Report: Establishing State Health Insurance Exchanges (2010).