Why the fate of health reform lies in states' hands

By Suzy Khimm

Though reform opponents have derided the Affordable Care Act for being a "federal takeover" of the health-care system, the new health law actually leaves a lot up to the states.

Take the creation of the new state-based insurance exchanges, which are intended to provide more affordable and accessible coverage to individuals and small businesses. Due to pressure from more conservative members, the Senate ended up adopting a state-based system instead of the national exchange in the House bill, paving the way for the current law. Though there will be federal rules and regulations for the exchanges, each state is tasked with creating and administering them. So state officials — both elected and appointed — will be bearing a lot of responsibility for enacting reform and regulating the insurance market.

Some states have already beefed up their oversight of the health-care system and insurance market, and the regulatory battles they’re facing portend the kind of challenges that officials will be facing on the state level.

In Massachusetts yesterday, the state’s Division of Insurance rejected “235 of 274 increases proposed by Massachusetts health insurers for small businesses and individuals ... mark[ing] the first time state government in Massachusetts has used its authority to deny health premium increases," the Boston Globe reports.

The ruling makes good on a promise made by Gov. Deval Patrick to turn down excessive price increases.

And in Maine, there’s an ongoing legal battle over a state insurance regulator’s decision to reject an insurance company’s request for a premium hike last year. Anthem Blue Cross and Blue Shield, which is part of WellPoint, argues that they needed the premium increase to turn a profit during the recession. Contesting the state ruling in court, Anthem maintains that the insurance regulator’s decision had “zeroed out its profit to keep customer rates down” in the individual market, according to the Wall Street Journal.

As the Journal notes, there are at least 29 states that give state regulators direct authority over premium rates. And the arrival of new insurance exchanges, which have to be set up by 2014, will only expand their responsibilities and the scope of these officials’ authority. Though the federal government is responsible, under the new health law, for examining “unreasonable increases” in premiums, most of the oversight will be in the states’ hands. Massachusetts and Maine have adopted reforms that are quite similar to key elements of the new health law, and the outcomes of the current battles could end up setting a precedent for way that state officials will be able to shape the insurance market and implement the new health law.

And by leaving so much up to the states, the health law could end up creating a system in which there are significant disparities in health coverage and insurance regulation, at least partly depending on political will. As I explained in a recent piece for Mother Jones, “reform-resistant state governments will have much opportunity for foot-dragging and spotty regulatory enforcement” because of their new responsibilities under the health law.

On the flip side, there are blue states that have been aggressive about starting to enact the new health law, at times going above and beyond what they call for. That Deval Patrick is running for reelection this year — against a former insurance executive, no less — hasn’t escaped the attention of Massachusetts insurance lobbyists, who have accused the governor of playing politics after the state rejected the premium hikes this week.

And as more state governments begin to adopt the reforms required by new health law, these kinds of state-level battles are likely to play out across the country.

— Suzy Khimm is a journalist who covered health-care reform at the New Republic and is now a political reporter at Mother Jones.