Washington Governor Signs Insurance Exchange Bill Into Law

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Gov. Chris Gregoire on Friday signed into law a bill setting rules for insurers preparing for the state’s online insurance exchange.

Online insurance exchanges are key to the federal health care overhaul signed into law by President Barack Obama in 2010. The state exchanges for individual and small-group plans are set go live on January 1, 2014.

“All citizens in this nation deserve health care, not just those who can afford it,” said Gregoire. “To those who say they are not supportive of the Affordable Care Act, then what?”

Twenty-six states, Washington among them, have signed on to a lawsuit seeking to overturn the act. Attorney General Rob McKenna signed on Washington state as opposing the act against Gregoire’s wishes.

They argue that a government requirement that individuals buy health insurance is unconstitutional. The U.S. Supreme Court will start hearing arguments in the case on Monday.

If the act is overturned in its entirety, the state’s exchange could still be put in place but federal funding, including a planned major expansion of Medicaid, would likely be lost. State Insurance Commissioner Mike Kreidler said that his office is committed to getting the exchange in place on schedule.

“If we slowed down to be anxious, we’d be in trouble,” Kreidler said. “It’s the law, and we’re proceeding as quickly and as prudently as we can.”

Insurance exchanges will work as online marketplaces, such as those widely used for airplane tickets and hotels, where consumers can compare different plans’ coverage options and prices. Under the new law, carriers will be able to sell plans outside of the exchange but won’t be allowed to target the young and the healthy by offering only cheaper plans with higher deductibles.

Gregoire vetoed a portion of the bill that would have shuttered the exchange if it were no longer self-sustaining, citing an “undue risk of litigation.”

The insurance industry is divided over the exchange law, with some companies, including Group Health, saying it creates a level playing field. Others, including Premera Blue Cross and Regence BlueShield, complain that it stifles the free market.

Catastrophic plans, available to younger people of limited means, would be available only inside the exchange.

The exchange law also stipulates that the state will use its largest small group insurance plan – currently the Regence BlueShield Innova plan – as its benchmark plan for determining its essential benefits.

Under the federal law, all plans will have cover emergency care, hospitalization, prescription drugs, mental health care and maternity care. Initially, the Obama administration was expected to provide states with a definitive list of essential benefits, but it left that task to the states until at least 2016.

The exchange measure was opposed in the Legislature by most Republicans, who say it is unnecessary for the state to go further in setting rules for the exchange beyond what the federal government has done, particularly while many specifics of health care reform remain unresolved and the Supreme Court has yet to weigh in.

Without a state-run exchange, the federal government would either step in to run the state exchange or select a nonprofit entity to do so.