State exchanges: "Health plans similar to those available to Congress

Health Insurers Will Be Charged to Use New Exchanges

By ROBERT PEAR

WASHINGTON — The Obama administration said Friday that it would charge insurance companies for the privilege of selling health insurance to millions of Americans in new online markets run by the federal government.

The cost of these “user fees” can be passed on to consumers. The proposed fees could add 3.5 percent to premiums for private health plans sold in insurance exchanges operated by the federal government.

In a separate action, federal officials said that consumers would soon have access to nationwide health plans similar to those available to members of Congress and other federal employees. These plans will be offered by private insurance companies under contract with the United States Office of Personnel Management. The agency already provides insurance to eight million federal employees, retirees and dependents.

“This new initiative will promote competition in the insurance marketplace and ensure individuals and small businesses have more high-quality, affordable insurance choices,” said John Berry, director of the personnel agency.

The steps announced on Friday show the White House rushing to carry out the health care law signed by President Obama in March 2010. They also illustrate the rapidly growing role of the federal government in the nation’s health care system.

Consumer advocates, insurers and some state officials had expressed concern about delays in publication of the rules proposed on Friday.

Starting in October, consumers are supposed to be able to enroll in new health plans, for coverage beginning on Jan. 1, 2014, when most Americans will be required to have insurance. At least two nationwide health plans chosen by the federal government will compete with private health plans in the insurance exchanges being established in every state.

The exchanges are supposed to be financially self-sustaining after 2014. States, like the federal government, can charge fees to insurers. Or they can try to raise money in other ways — for example, by charging consumers or employers for using the exchange.

In proposing the new rule, Kathleen Sebelius, the secretary of health and human services, said that fees charged by the federal government would be “sufficient to cover the majority of costs related to the operation of federally facilitated exchanges.” She did not say how the remainder of the money would be raised.

Ms. Sebelius said she could not estimate the total amount of federal user fees because she did not know exactly how many states would have federal exchanges. She said the federal fees should generally be “commensurate with fees” charged by state-run exchanges.

The federal government will run the exchange in any state that is unable or unwilling to do so. Indeed, it now appears that federal officials could be running the exchanges — alone or in partnership with local officials — in more than half the states.

Fees charged for use of the federal exchange come on top of a separate annual fee to be imposed on health insurance companies to help offset the cost of expanding coverage under the new law. The annual fees, to be apportioned among insurers according to their shares of the nation’s health insurance market, are expected to total $6 billion in 2014 and more than $100 billion over 10 years.

“Any new fees to pay for the administration of exchanges will add to the cost of coverage,” said Robert E. Zirkelbach, a spokesman for America’s Health Insurance Plans, a trade group.

Erin Shields Britt, a spokeswoman for Ms. Sebelius, predicted that insurers would not raise prices. “Exchanges will provide already profitable insurance companies with access to 30 million new customers while cutting down insurers’ marketing and advertising expenses,” Ms. Shields Britt said. “Exchanges force insurance companies to compete and drive down costs for consumers. The Congressional Budget Office has estimated consumers will save up to 20 percent on their premiums.”

The Office of Personnel Management said its nationwide plans would follow state insurance laws and standards, except in unusual circumstances.

The administration said it “retains authority to make the final decision” on rates if it finds that a state acted in an arbitrary or capricious way in denying a rate increase sought by a nationwide health plan.