HOUSE BILL REPORT

HB 1740

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

As Reported by House Committee On:

Health Care & Wellness

Ways & Means

Title: An act relating to the creation of a health benefit exchange.

Brief Description: Establishing a health benefit exchange.

Sponsors: Representatives Cody, Schmick, Jinkins and Hinkle; by request of Governor Gregoire.

Brief History:

Committee Activity:

Health Care & Wellness: 2/7/11, 2/17/11 [DPS];

Ways & Means: 2/23/11, 2/24/11 [DPS(HCW)].

Brief Summary of Substitute Bill

  • Requires the state to establish a health benefit exchange.

  • Requires the Health Care Authority, in consultation with the Joint Select Committee on Health Care Reform, to apply for and implement federal grants and provide options to the Legislature for establishing the exchange.

HOUSE COMMITTEE ON HEALTH CARE & WELLNESS

Majority Report: The substitute bill be substituted therefor and the substitute bill do pass. Signed by 10 members: Representatives Cody, Chair; Jinkins, Vice Chair; Schmick, Ranking Minority Member; Hinkle, Assistant Ranking Minority Member; Clibborn, Green, Harris, Kelley, Moeller and Van De Wege.

Minority Report: Do not pass. Signed by 1 member: Representative Bailey.

Staff: Jim Morishima (786-7191).

Background:

Health Benefit Exchanges.

The federal Patient Protection and Affordable Care Act (PPACA) requires every state to establish an "American Health Benefit Exchange" (Exchange) no later than January 1, 2014. The Exchange must serve both small groups (in a so-called SHOP Exchange) and individuals and must be self-sustaining by January 1, 2015. If a state chooses not to establish an Exchange, the federal government will operate an Exchange either directly or through an agreement with a nonprofit entity.

Under the PPACA, an Exchange's functions include:

Health plans in the Exchange will be available in four different levels based on the percentage of costs the plan will pay: Bronze (60 percent), Silver (70 percent), Gold (80 percent), and Platinum (90 percent). In order to be qualified to sell insurance in an Exchange, a carrier must:

Premium subsidies on a sliding scale will be available in the Exchange for persons between 133 percent and 400 percent of the federal poverty level (FPL) in the form of advanceable, refundable tax credits. Depending on a person's income level, the subsidies will ensure that the premiums the person pays will be no greater than a certain percentage of the person's income: under 133 percent FPL = 2 percent of income; 133-149 percent FPL = 3-4 percent of income; 150-199 percent FPL = 4-6.3 percent of income; 200-249 percent FPL = 6.3-8.05 percent of income; 250-299 percent FPL = 8.05-9.5 percent of income; and 300-399 percent FPL = 9.5 percent of income.

The PPACA provides states with some flexibility when implementing the Exchanges. For example:

State Planning Activities.

In 2010 there was a variety of planning activities relating to Exchanges. For example, the Legislature established the Joint Select Committee on Health Reform Implementation, which established an advisory group to consider issues relating to establishing an Exchange. The Office of the Insurance Commissioner established a Realization Committee, which also made recommendations relating to an Exchange. Finally, the Health Care Authority (HCA) received a planning grant, which it used, in part, to develop several issue briefs relating to Exchanges.

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Summary of Substitute Bill:

The state must establish an Exchange no later than January 1, 2014. The Exchange is intended to:

The Exchange must be governed by a public-private partnership, with a governing board, whose structure will be established by legislation no later than July 1, 2012. Meetings of the board will be subject to the Open Public Meetings Act.

The HCA must apply for establishment and planning grants under the PPACA in consultation with the Joint Select Committee on Health Care Reform Implementation. Whenever possible, the grant applications must allow for using grant funds to partially fund the activities of the Joint Select Committee on Health Care Reform Implementation. The HCA, in consultation with the Joint Select Committee on Health Care Reform Implementation, must implement any grants received by the federal government.

By January 1, 2012, the HCA, in consultation with the Joint Select Committee on Health Reform Implementation, must develop a broad range of options for establishing and implementing a state-administered Exchange. The options must include recommendations on:

In consultation with the Joint Select Committee on Health Reform Implementation, the HCA must develop a work plan for the development of the options in discrete, prioritized stages.

The HCA must consult with the Insurance Commissioner, the Joint Select Committee on Health Reform Implementation, and stakeholders when carrying out its responsibilities, including consumers; individuals and entities with experience facilitating enrollment in health insurance coverage; representatives of small businesses, employees of small businesses, and self-employed individuals; advocates for enrolling hard-to-reach populations and populations enrolled in publicly subsidized health programs; the Office of the Insurance Commissioner; publicly subsidized health care programs; and members of the American Academy of Actuaries. The HCA may enter into information sharing agreements with federal and state agencies and interdepartmental agreements with other state agencies. The HCA must also provide staff and resources, manage grant and other funds, expend appropriated funds, and adopt necessary rules.

Substitute Bill Compared to Original Bill:

The proposed substitute bill:

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Appropriation: None.

Fiscal Note: Available.

Effective Date of Substitute Bill: The bill takes effect 90 days after adjournment of the session in which the bill is passed.

Staff Summary of Public Testimony:

(In support) The PPACA requires the establishment of Exchanges by January 1, 2014. The state may develop its own Exchange or the federal government will operate one on behalf of the state. This bill creates a process for stakeholders to weigh in. This bill was informed by the work of the Joint Select Committee on Health Care Reform Implementation and the Insurance Commissioner's Realization Committee. A maternal and child health expert should be added to the board. The Exchange should coordinate with other federal programs. The bill should create a mechanism to work with the tribes. This effort should be housed in the HCA, which is accountable for the planning grant. There should be clarity about what comes back to the Legislature.

(In support with concerns) This bill allows the Exchange to be established as an active purchaser. The bill should go further than it has to include items for which there is general consensus; e.g., a single Exchange for administrative purposes. There should be no further research on this type of issue. The bill should create the governing board, not an intermediate board. Insurance coverage should be provided to everyone in every corner of this state. There should be a high bar for participating in the Exchange. Issues relating to transportation, language access, and coordinated care should be addressed. Consumer literacy should be addressed; it is the best predictor of health outcomes. The Exchange should harness the bargaining power of small businesses and individuals to become a more active purchaser. There should be a public option in the Exchange. Establishment of an Exchange is critical for older people who are too young for Medicare. The Exchange should be an organized, transparent, accountable marketplace where people can compare apples to apples and access subsidies. Access to the Exchange should be seamless; the Exchange should be a one door access point for at-risk communities. There should be adequate consumer assistance in the Exchange. The Board should analyze the role of association health plans. The Joint Select Committee on Health Reform Implementation is no substitute for the Board. The composition of the Board should be expanded and stronger conflict of interest and stakeholder language should be included. The Board should be subject to the Open Public Meetings Act. There should be more detail on the appointment process to the Board. The business plan created by the Board should be submitted to the Legislature for further action. The Board should not go too far afield of what is funded by the federal grants.

(With concerns) The Exchange should not be a selective purchaser. Planning for the Exchange should be done through the Joint Select Committee on Health Care Reform Implementation, which is more inclusive and has a legislative component. When planning the Exchange, the details are critical. It is premature to establish the Board within the HCA. Some of the research done by the HCA takes a point of view, and it is premature to decide these complicated issues. It is important to foster a broad, bipartisan dialogue and foster the participation of people with expertise.

(Opposed) This bill removes the decision of how to establish an Exchange from the Legislature and puts it in the hands of unelected political appointees. Planning for the Exchange should be done through the Joint Select Committee on Health Care Reform Implementation, which is more open and inclusive. A bill is not needed for the executive branch to do this. By passing a bill, the Legislature is blessing the work of the Board.

Persons Testifying: (In support) Jonathon Seib, Office of the Governor; Lonnie Johns-Brown, American Indian Health Commission and March of Dimes; and Karen Merrikin, Group Health Cooperative.

(In support with concerns) Jennifer Allen, Healthy Washington Coalition; Teresa Mosqueda, Washington State Labor Council; Sofia Aragon, Washington State Nurses Association; Kent Davis, Main Street Alliance; Ingrid McDonald, Association for the Advancement of Retired Persons; John Paul Chaisson-Cardenas, Washington Community Action Network; Misha Werschkul, Service Employees International Union 775 NW; and Dave Knutson, United Healthcare.

(With concerns) Chris Bandoli, Regence Blue Shield; Mel Sorensen, American's Health Insurance Plans, Washington Association of Health Underwriters, and National Association of Insurance and Financial Advisors; and Sydney Smith Zvara, Association of Washington Healthcare Plans.

(Opposed) Patrick Connor, National Federation of Independent Business; and Scott Dahlman, Washington Farm Bureau.

Persons Signed In To Testify But Not Testifying: None.

HOUSE COMMITTEE ON WAYS & MEANS

Majority Report: The substitute bill by Committee on Health Care & Wellness be substituted therefor and the substitute bill do pass. Signed by 25 members: Representatives Hunter, Chair; Darneille, Vice Chair; Hasegawa, Vice Chair; Alexander, Ranking Minority Member; Dammeier, Assistant Ranking Minority Member; Orcutt, Assistant Ranking Minority Member; Carlyle, Cody, Dickerson, Haigh, Haler, Hinkle, Hudgins, Hunt, Kagi, Kenney, Ormsby, Parker, Pettigrew, Ross, Schmick, Seaquist, Springer, Sullivan and Wilcox.

Minority Report: Do not pass. Signed by 2 members: Representatives Bailey, Assistant Ranking Minority Member; Chandler.

Staff: Erik Cornellier (786-7116).

Summary of Recommendation of Committee On Ways & Means Compared to Recommendation of Committee On Health Care & Wellness:

No new recommendations were made.

Appropriation: None.

Fiscal Note: Available.

Effective Date of Substitute Bill: The bill takes effect 90 days after adjournment of the session in which the bill is passed.

Staff Summary of Public Testimony:

(In support) Some aspects of the bill could be perfected, but it is important to move forward on health care reform and maintain eligibility for federal health reform funding. This bill should be revenue neutral and could even bring in revenue because it makes the state eligible for federal funding.

(Opposed) None.

Persons Testifying: Jennifer Allen, Planned Parenthood and Healthy Washington Coalition.

Persons Signed In To Testify But Not Testifying: None.