Donald Fry: Maryland readies its health care exchange, but will market be there?

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By Donald C. Fry:

Maryland took a bold step when it decided to become what the federal government classifies as an “early innovator” in setting up its own health care benefit exchange to offer health insurance to individuals and small companies under the Affordable Care Act.

Few will dispute the fact that those who have built the Maryland exchange have done a credible, difficult and far-from-completed job with a noble goal. But like any entrepreneurial venture, choosing to set up a state exchange has its risks and rewards.

One reward is federal funding. As an early innovator Maryland got early money from the federal government. In 2011 seven states got early innovator grants to pioneer the development of IT infrastructure to support the exchange operations.

The idea was that those states would share what they learned with other later adopters. The downside was that setting up the infrastructure was incredibly difficult. Three states returned the money and withdrew from the program. Maryland soldiered on.

The reward was that Maryland progressed from the planning grant stage to a second funding round known as the establishment grant. These are huge federal grants that support the development and implementation of the exchanges. They are awarded on a rolling basis. Maryland qualified for $27.2 million in Level One grants and moved on to be awarded a Level Two grant of $123 million, for a total of $150.2 million in federal funds.

One would think that with such strong federal support, states would be lining up to set up their exchanges and draw down the federal dollars. However, only 16 states and the District of Columbia have moved forward to set up their own exchanges.

Seven have formed a partnership with the federal government, meaning that the federal government assumes the responsibility to market and run the exchange while the state regulates it. The remaining states have all defaulted to the federally-run Health Insurance Marketplace.

The risk those states experienced was related to the complexity of setting up an exchange that could work and work well, and the deadline for sustainability. After 2015, states must assume the cost of running their own exchanges. The federal government has predicted that exchanges will be self sustaining by that time. If Maryland’s exchange is self supporting, that will be a tremendous reward.

But the sands are shifting underneath the Affordable Care Act. Most recently the Obama administration decided to delay implementing the mandate that large employers provide health insurance. Some see this as the administration backing away from full implementation due to both time and financial constraints. The working marketplaces must be open for enrollment in all 50 states by October 1, 2013. Yet recently, a health care reform expert told a Congressional oversight panel that the administration “is in triage mode. Seriously, they do not have the resources to implement all of the provisions on time.”

Nationally political opposition to the plan from Republicans remains strong with efforts still afoot to stifle funding. That is a risk. Opposition in Maryland is minimal and the state exchange has indicated that it will be ready on October 1, when open enrollment for families and individuals will be offered. Enrollment for small businesses in the state will begin on January 1, 2014, according to the Maryland exchange’s web site,

Finally, there are both risks and rewards inherent in the insurance pool. The theory behind the Affordable Care Act is that by expanding the pool of insured, drawing a large cadre of now-uninsured-but-healthy young adults, the marketplace will then be able to provide health care for those who are not healthy and, in many cases, less affluent.

The reward here is obvious, health care for all who need it. The risk is that young healthy adults will choose not to enter the marketplace, preferring to take their chances and/or to pay the penalties for not purchasing health care insurance.

During the Supreme Court argument on the Affordable Care Act, Justice Samuel Alito said that young, healthy adults right now spend about $854 a year on health care. Purchasing health insurance under the Affordable Care Act would cost more than $5,800. One can see that the choice to opt out is more than tempting.

This is the state of play facing Maryland’s exchange and exchanges across the country. There is no denying that Maryland has done all it can in this arena to be both compassionate and forward thinking.

Whether it’s enough is a question that the market will answer beginning in October.

Donald C. Fry is president and CEO of the Greater Baltimore Committee. He is a regular contributor to Center Maryland.

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Donald C. Fry has been the president and CEO of the Greater Baltimore Committee (GBC), the central Maryland region's most prominent organization of business and civic leaders, since November 2002.

Under Don’s leadership, the GBC is recognized as a knowledgeable and highly credible business voice in the Baltimore region, Annapolis and Washington, D.C. on policy issues and competitive challenges facing Maryland. Its mission is to apply private-sector leadership to strengthening the business climate and quality of life in the region and state.

Fry served as GBC executive vice president from 1999 to 2002. From 1980 to 1999 Fry was engaged in a private law practice in Harford County. During this time he also served in the Maryland General Assembly. He is one of only a handful of legislators to have served on each of the major budget committees of the General Assembly.

Serving in the Senate of Maryland from 1997 to 1998, Fry was a member of the Budget and Taxation Committee. As a member of the House of Delegates from 1991 to 1997 Fry served on the Ways and Means Committee and on the Appropriations Committee.

Fry is a 1979 graduate of the University of Baltimore School of Law. He earned a B.S. in political science from Frostburg State College.