One of the most important differences between the current House and Senate health reform bills is their approaches to the enforcement of the insurance reform provisions of the bill and to implementation of the health insurance exchanges. Briefly, the House bill would create a new federal agency, the Health Choices Administration, to enforce the insurance reforms (in cooperation with the states) as well as a national exchange. States that created their own insurance exchanges could opt out. The Senate bill, on the other hand, largely depends on the states to enforce the law and to implement the exchanges. The House bill would have implemented a single nation-wide reform program; the Senate bill could potentially create a fragmentary, inconsistent, and impotent approach to reform. I have written about the strengths of the House approach and the weaknesses of the Senate approach in a New England Journal perspective, and in a monograph for the Commonwealth Fund on insurance exchanges.
With the final passage of a Senate bill on Christmas eve, negotiations were underway between the House and Senate on final legislation. Reportedly, progress was being made on a compromise on the national/state enforcement issue that might have created something more closely approximating a national exchange. All of that came to an end with the Massachusetts special election, which brought to a close the possibility of the Senate adopting a compromise health care reform bill with a filibuster-proof majority.
At this point, the most viable of the options (all of them bad) for moving health care reform forward is for the House to adopt the Senate bill as it is, and then to try to fix some of its worst features through a budget reconciliation bill, as I have argued elsewhere.
This would mean leaving the Senate bill in place, including its exchange and enforcement provisions. It is possible, however, that this might not be as bad an option as would appear at first glance.
The most important provisions of the Senate bill with respect to enforcement are found in section 1321. Subsection (a) of this section begins by stating that “the Secretary [of Health and Human Services] shall, as soon as practicable after the date of enactment of this Act, issue regulations setting standards for meeting the requirements under this title” relating to the establishment and operation of exchanges, the offering of qualified health plans, and the establishment of the risk adjustment and reinsurance programs required by the Act. The section specifies that HHS will also promulgate regulations to implement the insurance reforms of the statute under the Public Health Services Act.
Subsection 1321(b) next specifies that “Each State that elects, at such time and in such manner as the Secretary shall prescribe, to apply . . . [the requirements of subsection (a)] shall not later than January 1, 2014, adopt and have in effect–(1) the Federal standards established under subsection (a); or (2) a State law or regulation that the Secretary determines implements the standards within the State.”
Subsection 1321(c)(1) provides that if a state does not elect to implement the federal law or, if “the Secretary determine, on or before January 1, 2013, that an electing State–(I) will not have any required Exchange operational by January 2, 2014; or (ii) has not taken the actions the Secretary determines necessary to implement–(I) the other requirements set forth under subsection (a); or [the insurance reform requirements of the statute]; the Secretary shall (directly or through agreement with a not-for-profit entity) establish and operate such Exchange within the State and the Secretary shall take such actions as are necessary to implement such other requirements.”
Subsection 1321(c)(2) provides that section 2736(b) of the Public Health Services Act shall apply to enforcement of the requirements of subsection (a), and that the authority under that section is extended to nongroup health plans. 2736 is the current 42 U.S.C. 300gg-22, which provides that if HHS determines that a state has substantially failed to enforce a provision of the statute with respect to health insurance issuers, HHS shall enforce the law directly. Section 2736 further authorizes HHS to impose a civil penalty of up to $100 per day for each individual affected by a violation at section (b), subject to some exceptions.
Subsection 1321(d) provides that “Nothing in this title shall be construed to preempt any State law that does not prevent the application of the provisions of this title,” and the final section provides, essentially, that there is a presumption that the Massachusetts Connector will meet the requirements of the act unless HHS determines otherwise.
It is possible to imagine a range of possibilities as to how this section might be implemented. On the one hand, HHS could promulgate a set of weak and open-ended regulations, giving the states virtually unbridled discretion in implementing the law and the exchanges. It could then abdicate responsibility for any state that elects to implement the law, regardless of how insincere or ineffectual the state’s implementation efforts were. With respect to states that refuse to implement the law, HHS could delay implementation until the last possible minute, and then implement the law timidly and half-heartedly. If this is the course HHS takes, the reforms will fail. We can count on the insurance industry to vigorously and consistently resist implementation, and there is every sign that they will be joined by a number of states. If HHS lacks stalwart resolve, the reforms will never be fully implemented.
If, on the other hand, HHS right out of the gate promulgates tough regulations demanding full compliance by insurers and the states, moves quickly to establish a fall-back national exchange to take control in states that elect not to implement the law or fail to do so, refuses to accept any state laws that do not fully and completely implement the federal standards, confronts aggressively states that elect to implement the law but fail to do so, moves promptly in 2013 to get an exchange and enforcement under way in states that are not clearly on track to implementation themselves, comes down hard on insurers that do not fully comply with the law, and makes sure the law is fully in force in all states, the Senate bill could result in uniform and complete national enforcement of the law. HHS also has authority under section 1311(a) to provide funds to the states to assist them in implementing the reforms, but may, and should, refuse to renew grants to states that are not moving forward deliberately in establishing exchanges and implementing the reforms. HHS can also use funding, therefore, as a means of encouraging vigorous and prompt implementation by the states.
The House should move now to enact the Senate bill. It should do so, however, only after it has received full and complete assurances from the White House and from the Secretary of HHS that HHS intends to fully, promptly, and vigorously implement the law, cooperating with and supporting states that also move aggressively forward with implementation, but shoving out of the way states that choose to impede rather than implement reform. If the federal government takes such an approach to implementation, we could get almost as effective national reform out of the Senate bill as we could have obtained from the House bill.
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The views reflected in this blog are those of the individual authors and do not necessarily represent those of the O’Neill Institute for National and Global Health Law or Georgetown University. This blog is solely informational in nature, and not intended as a substitute for competent legal advice from a licensed and retained attorney in your state or country.