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By John Reichard, CQ HealthBeat Editor

The health care law will disappoint many Americans if its health insurance exchanges don’t deliver decent coverage at affordable rates for consumers, including those with serious illnesses like cancer.

Meeting those expectations may be difficult, judging from comments by a major patient advocacy group as it waits for the Obama administration to release rules governing the development of the exchanges and watches state legislatures draft exchange laws.

For example, the American Cancer Society Cancer Action Network recently released a series of “threshold questions” that states should address if they are going to design exchanges under the laws that meet the needs of cancer patients.

They include: Will boards overseeing exchanges be structured to meet consumer interests? Will insurance market regulations outside of exchanges discourage these marketplaces from becoming a dumping ground for bad insurance risks? Will it be easy for exchange customers to enroll in Medicaid or move from Medicaid to private exchange plans when their incomes rise? Will the exchanges have a stable source of funding? Will they be an “active purchaser” with the power to exclude plans that offer lousy value?

Stephen Finan, senior director of policy for the Cancer Action Network, said in an interview Wednesday that “it’s a mixed bag” in terms of how well states are doing so far on those parameters. Of the dozen or so states with exchange laws, California, Connecticut, and Maryland are “on the good end” of the spectrum and Colorado, Oregon and Nevada are on the “not so good” end, he said.

States that are moving in the right direction have done a good job dealing with critical issues like governance, he said. They are coordinating their outside markets to work well with exchanges and keep them from attracting disproportionate numbers of insurance enrollees who are costly to cover. These states also are on track to coordinate well with Medicaid programs and have a stable source of funding, with plans to charge fees to all insurers in the state, not just those that offer coverage on the exchange.

States performing inadequately, on the other hand, are setting up exchange oversight boards that are too big, or have too many insurers or providers running things. These states won’t coordinate well with the outside market, and they would leave funding of exchanges to the uncertainty of the yearly appropriations process.

The overwhelming majority of states have yet to pass legislation creating exchanges, which means it’s still unknown whether exchanges in most states will prove worthwhile for consumers. Finan said that the upcoming proposed exchange regulation to be issued by HHS could push states in the direction of making good decisions by offering guidance on creating effective exchanges.

But Finan said he thinks the proposal will be very wide ranging. “It could be a soup-to-nuts thing for every option” for creating exchanges, he said. And making a good exchange is a challenging proposition that involves much more then simply knowing about a wide range of design options. “It’s not just the pieces, it’s how they fit together,” he said. “It’s not an easy thing to build a good exchange.”

“What we hope is that the final regulation will establish clear minimum standards,” he said. “I don’t think we’ll see that in the proposal,” he added, predicting that it will list a wide array of design options in order to draw a wide range of comments.

Consumer advocates may face difficulty obtaining a final exchange regulation to their liking.

Republicans have traditionally been strong allies of the insurance industry, and the industry has a history of turning exchanges into dumping grounds for bad risks. But Finan says that consumer groups are coordinating their efforts to produce exchanges that work well for their members.

“The insurance groups have been talking regularly for almost a year,” he said. “We have weekly phone calls on exchange-related issues. We’re trying first and foremost to exchange information and educate each other.” In addition to the American Cancer Society, groups involved in the talks include Consumers Union, the Center on Budget and Policy Priorities, AARP, Families USA, the Small Business Majority, Health Care for American Now, SEIU, and the National Partnership for Women and Families. Finan said that in the end they may submit a common letter commenting on the proposed rule. If not, “I think there will be a fairly uniform set of messages,” he said.

John Reichard can be reached at jreichard@cq.com

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