States implement reforms of healthcare as lawsuits proceed

State governments are implementing the controversial healthcare law, even in places where elected officials are challenging its constitutionality.

Across the country, state employees are working to define new rules that health insurance companies will have to follow. They’re also applying for a wide variety of federal grants offered under the law.

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Government officials offer a number of reasons why states are implementing a law their governors and other elected officials oppose.

Some cash-strapped states are taking the opportunity to grab federal funds. Many governments are taking a cautious approach in making sure they comply with the new federal law — at least until the courts tell them they don’t have to.

But the most important reason, according to state officials, is to exert control over the biggest overhaul of healthcare policy since Medicare.

Lorez Meinhold, director of health reform implementation for Colorado — a state whose attorney general has joined the multi-state lawsuit against health reform — said state officials want to make sure they have a say in how the law affects their constituents.

“If the states want to have some level of control,” she said, “I think they’re looking at each piece.”

Even in Virginia, where Republican Attorney General Ken Cuccinelli has launched his own high-profile challenge to the healthcare law, state officials are cautiously cooperating.

The state’s Bureau of Insurance has set up a webpage to answer residents’ questions about the new law, linking to a federal website that critics have derided as propaganda. Virginia also created its own fact sheet on the Medicare prescription drug program, acknowledging that “the Affordable Care Act passed by Congress this year contains some important benefits for Medicare recipients.”

“This information is not intended to be an opinion, legal or otherwise, on the healthcare reform bill,” the state website cautions, “nor should it be construed as a position of the Bureau of Insurance or the Virginia State Corporation Commission on the healthcare reform bill or any of its provisions.”

Meinhold added that the lawsuits against the law are still in their infancy, and until they’re resolved, “is it really OK to be out of compliance with federal law?”

Opponents of the healthcare law have already seen they can lose control by deferring to the federal government.

Earlier this year, some governors — particularly Republicans — declined to operate their own high-risk insurance pools, in part over concerns that they were insufficiently funded by the federal government.

In the end, the Department of Health and Human Services simply ended up taking them over.

While that outcome came as no surprise — it was predetermined by the healthcare law — GOP governors will likely want to avoid the same conclusion with the much more momentous state health insurance exchanges, said health economist Len Nichols.

“I think all of them, regardless of the public rhetoric, are checking out their options,” said Nichols, formerly of the New America Foundation and now at George Mason University.

Nichols said he expects the rhetoric to cool down after the midterm elections, even if the federal government has a way to go before earning state officials’ trust.

“I think there’s an awful lot of folks trying to figure out what would make this state better that’s in this bill,” Nichols said. “I think that’s the general word of the day.”

The Obama administration says state cooperation has been exemplary.

“Part of what’s made implementation so successful so far is the close communication we’ve had with states,” said Paul Dioguardi, director of the Department of Health and Human Services’ (HHS) Office of Intergovernmental Affairs.

Dioguardi said the creation of high-risk insurance pools and HHS’s Web portal in particular required a “close partnership” with states. He pointed out that HHS met this week with state officials in Minneapolis for the first in a series of conversations on the state health insurance exchanges, and nearly every state sent a representative.

Likewise, Brian Webb, manager of health policy and legislation for the National Association of Insurance Commissioners, said he’s not aware of any state declining to participate in the NAIC’s meetings. The NAIC is charged with helping define the new rules health insurance companies will have to obey, such as how much they have to spend on providing care versus overhead.

“From the NAIC’s perspective, we have not had any states, no departments, say, ‘We will not participate,’ ” said Webb, who was once a legislative aide to then-Rep. Bill Thomas (R-Calif.). “So that has not been an issue for us. Of course, departments of insurance have this attitude of ‘Legislatures pass it, you implement it.’ ”

He added that, barely two months after grants were first made available to help states improve their ability to review insurance rates, only five or six have declined to apply. The healthcare reform law set aside $250 million in state grants over five years.

States have also been taking advantage of federal grants to help them assist consumers, boost their primary care workforce or support pregnant teenagers — nine different grant opportunities, in addition to federal funding for coverage of early retirees and the high-risk pools for people with pre-existing conditions.

Some are drawing parallels with last year’s debate over the stimulus bill.

“Most states are strapped for cash right now, is the reality,” Meinhold said.

“Even states that were opposed to [the recovery act] and some of the stimulus dollars, they still applied for a lot of those grants. So states are looking at ‘When does it make sense, is it an opportunity, does it help us?’ ”

Simply applying for federal grants doesn’t necessarily mean states are following the spirit of the law, though.

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The California-based nonprofit Consumer Watchdog made that point in a letter sent Tuesday to HHS Secretary Kathleen Sebelius urging her to reject Gov. Arnold Schwarzenegger’s (R) application for a rate review grant.

The letter criticizes the governor’s application because California would use the money to hire actuaries to review rate filings without giving them the authority to reject rate requests.

“I think the intent of the grants was specifically to enhance states’ ability to thoroughly evaluate and, where it can, to approve or disapprove rates,” said Carmen Balber, the group’s Washington director.