Battle over control of health law's exchanges roils North Carolina

Linker tells The Hill that legislation creates "major conflicts of interest" and "a weak exchange that has weak consumer protections."

Lou Borman, a spokesman for BCBSNC, denies that the insurer wrote the legislation but says it supports passage. He said the structure of the board is modeled after the state's high-risk pool and the exchange's roles are similar to those spelled out in a template developed by the National Association of State Insurance Commissioners.

Borman added that it shouldn't have come as a surprise to anybody that Blue Cross would have issues with the North Carolina Institute of Medicine proposal, which he said would have allowed the board to levy "unlimited" assessments on health plans to pay for the exchange's operation.

"It's the beginning of the discussion," Borman said of the bill. "There will be compromises along the way and we'll end up somewhere in the middle."

The bill would create an 11-member board of directors that includes four representatives of the health insurance industry, including one "recommended by the health carrier who covers the largest number of persons in the state." In 2009, according to data from the North Carolina Department of Insurance, BCBSNC wrote 95.9 percent of the individual health policies and 80.5 percent of the group policies in the state.

Borman said it makes sense for industry representatives to be on the board because they have expertise. But in a joint letter to the North Carolina Institute of Medicine, the American Cancer Society and the American Heart Association argued against allowing industry representatives to have voting rights on the board.

"A delicate balance must be maintained on the Exchange Board to ensure broad representation of stakeholders," the letter says. "The ACS and the AHA, among many other consumer and advocacy organizations, support an Exchange Board comprised of consumer advocates, the Insurance Commissioner, the State Medicaid Director, a state public health officer, and a broad representation of other stakeholders. Also, a strong conflict of interest clause is essential to ensure that Board members prioritize the needs of the consumers first.

"Our organizations recognize the value of the expertise, wisdom, information, and guidance that insurers, agents, and other medical providers would contribute to the Exchange Board," the letter continue. "For this reason, we recommend these individuals serve in an "ex officio nonvoting" capacity only, or in the alternative, they serve on standing advisory committees to the Exchange Board."

States have taken different stances on the issue. California and Massachusetts, for example, have rejected insurer participation on their boards because of conflict-of-interest concerns. But other states — a review by BCBSNC identified Alaska, Hawaii, West Virginia, Arizona, Mississippi, Texas and Connecticut — would give industry a voice in exchange legislation that they're considering.

Critics say the North Carolina legislation would not only strengthen BCBSNC's dominant status in the state but also allow it to sell sub-standard policies.

Wendell Potter, the insurance industry whistle-blower turned news analyst, criticized the legislation in an analysis for the Center for Public Integrity.

"In BCBSNC's bill, many of the consumer protections the various stakeholder groups had agreed to were nowhere to be found," Potter wrote. "For example, the exchange would not be allowed to limit the choices of health benefit plans to those that provide solid value to consumers. All plans, regardless of how inadequate they might be, would have to be offered. Also, no standardization would be allowed, meaning that consumers would not be able to get the information they need to make apples-to-apples comparisons between plans."

The bill, Potter goes on, "essentially would create little more than an Internet-based platform where the insurer could market and sell its policies – rather than a real exchange that would allow consumers to make meaningful comparisons among competitor policies."

Borman however says advocates are "exaggerating the role of the exchange."

He said the healthcare reform law largely mandates the quality of benefits health plans will have to offer if they want to participate in the exchanges, as well as the information consumers will be given access to as they shop in the exchange.

"There's not a whole lot of (flexibility)," he said, "for those [plans] who want to participate in this."