Battle begins over health care insurance exchange

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ANNAPOLIS – Business interests argued Tuesday for a slimmed-down version of a public health care insurance exchange proposed by Gov. Martin O’Malley to bring the state in line with the federal health care overhaul passed last year.

“We have an opportunity to connect Marylanders to affordable health care coverage,” Lt. Gov. Anthony G. Brown said during a House Health and Government Affairs Committee hearing. “That small business owner, who has been for years trying to extend health care coverage to her five employees in the pizza parlor, is going to have a place to go to find information about insurance and health care coverage.”

O’Malley’s legislation, HB 166 and SB 182, would create the framework of the public exchange where individuals and small businesses would be able to compare and purchase health care policies. An independent state agency would run operate the exchange.

The exchange would rate health policies based on price and quality and determine which individuals and companies would receive tax credits and other subsidies.

Business groups, representing the agents that sell health insurance and companies that would have the option of buying insurance from the exchange, decried the choice to make the exchange a state agency. That designation, they said, could give the exchange too much clout and an unfair advantage in competing with private insurance agents.

“There isn’t an insurance broker in the state who can compete with the state of Maryland in getting insurance business,” said Bryson Popham, a lobbyist for insurance brokers.

Popham pointed to a state-run exchange in Massachusetts. The Massachusetts Connector used state data to compile a list of companies in the state, and then sent them letters soliciting their health insurance business.

Ron Wineholt, a lobbyist for the Maryland Chamber of Commerce, said the bill should make sure the “exchange plays fairly and doesn’t have the ability to take advantage of the private market to take away that business.”

Making the exchange a state agency also would open it to budgetary raids, Wineholt said.

O’Malley proposed taking $20 million from the quasi-public Injured Workers Insurance Fund last year to help balance his budget, but lawmakers stripped the provision from the final version of the spending plan.

Some lawmakers, too, have split from the governor’s plan. A pair of bills, HB 516 and SB 107, would create a nonprofit exchange with a more limited scope than the governor’s proposal.

That exchange would be barred from soliciting the business of individuals or companies that are already insured and employees who help Marylanders find health plans would have to be licensed insurance agents.

Del. Nicholaus R. Kipke, an Anne Arundel County Republican who cosponsored the House bill, said he hopes “we can include some of these principles in the final product.”

Supporters of the governor’s proposal said a government-run exchange would be subject to more oversight and transparency requirements than a nonprofit, but added the state would study whether the exchange would function better as a nonprofit once it had been established in the market.

“It is not the goal of the administration to siphon, draw or provide disincentive for existing client-broker relationships,” Brown said.

Joshua M. Sharfstein, secretary of the state Department of Health and Mental Hygiene, said the administration “wants to build on the existing market for small-business health insurance.”

Whatever comes out of the legislature this spring will not be the final word on the matter, as the legislation leaves many questions unanswered.

State health officials and lawmakers must still decide whether to split the individual and small business customers into separate markets and if the exchange will offer all health insurance plans or a limited selection.

According to the federal health care law, the exchange must be running by Jan. 1, 2014, and be self-supporting a year later. The state has received $1 million to develop its plan and expects to receive an additional federal grant to set up the exchange, Sharfstein said.