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Wisconsin’s new Office of Free Market Health Care, created by Gov. Scott Walker to setup the health insurance exchange required by the federal health care law, is considering moving Medicaid recipients into private plans offered on the exchange. Such a move could reduce state costs and expand options for Medicaid recipients, but one critic questions what protections would remain for patients under such a “privatized” system.

The state-run exchanges required by the federal law are intended to be marketplaces where policies offered meet certain federal requirements. Customers and small employers who buy insurance through the exchanges will be eligible for federal subsidies. States must submit plans for their exchanges by 2013, or the federal government will step in and take control of their design.

A web survey posted on the Office of Free Market Health Care’s new website asks if the state “should buy Medicaid eligible individuals into commercial plans” on the exchange, which will offer privately administered plans once it’s up and running. (The federal law sets a deadline of 2014.)

Under such an arrangement, Medicaid coverage could supplement private plans purchased on the exchange, according to Seth Boffeli, spokesman for the state Department of Health Services, the office that, along with the office of the state insurance commissioner, is directing the Office of Free Market Health Care.

“The state may have to wrap around any additional required benefits not provided by the commercial plan,” he says. “Potential advantages include more choice of plans and options for members and (allowing) members to identify plans that best meet their needs.”

Buying Medicaid recipients into plans on the exchange would also “potentially lower costs” for the state, he says, along with higher reimbursement rates for health care providers.

Bobby Peterson, director of ABC for Health, a Madison law firm that represents clients in cases against health insurers, suggests that transferring Medicaid recipients into plans on the exchange could mean fewer protections for patients. “What type of oversight would be available to people that currently have solid protection under state and federal law as Medicaid enrollees?” he says.

Peterson and others also warn that “a la carte” approaches to health insurance – allowing customers to opt out of certain types of coverage – lead to higher health care costs.

scott walker

“It seems like the Office of Free Market Health Care wants to convince people that they can save money by using the private marketplace,” he says, “but if they fail to maintain insurance or purchase inferior coverage, the answer (then) is to redistribute and socialize any medical debt.” Such redistribution happens when health care providers, particularly emergency rooms, absorb the costs of uncovered services; and those higher costs, he argues, lead to higher prices for everyone.

Another question on the survey asks if the state should institute penalties for customers who drop coverage then re-enroll after they get sick. The questionnaire says that when customers wait to buy health insurance until they need it, they’re driving up premiums for all customers.

The survey also asks if respondents support waiting periods – such as 30 days – between when customers buy insurance and when coverage begins, another possible strategy for preventing such premium increases.

“The state is gathering input to determine best strategies for mitigating impact within the exchange,” Boffeli says.

Peterson asks why the state would add such penalties when the federal law will require everyone to buy insurance. “Why not require people to maintain insurance as planned by the law in 2014?” he says. Walker opposes this requirement, called the “individual mandate.”

In January, soon after taking office, Walker authorized state Attorney General J.B. Van Hollen to join a multi-state lawsuit challenging the constitutionality of the health care law.

Other questions posed in the survey:

One asks if the state, which would have access to claims data through the exchange, should use it to generate publicly-available reports “on (health care) provider or clinic cost and quality.”

Another asks if the exchange should limit premium increases to when customers initially enroll in a plan or when they renew one.

Other possible features include allowing the exchange to collect premiums from small employers or individuals and then submit them to insurers in lump payments.

Employees could also be allowed, under a “defined contribution option,” to choose their own plans on the exchange. Their employers would establish the “defined contribution” they would be willing to pay, and the employee, after selecting a plan, would be responsible for the balance.

Web portal

Wisconsin has also launched a prototype of the web portal that will serve as the front end for the state’s insurance exchange. The state recently won a $37.7 million “early innovator” grant from the U.S. Department of Health and Human Services to upgrade its computer systems to host the exchange.

The prototype website allows users to select one of five sample households and walk through, step-by-step, pages for entering personal information and the names of preferred doctors, clinics and hospitals. These preferences, along with others identified, are used to rank plans. (Because the website is a prototype, the plans are fictional.)

One of the pages includes a button to “request an exemption” from the individual mandate – the requirement that every citizen buy health insurance. The federal health care law outlines possible exemptions, including religious ones.

Walker created the Office of Free Market Health Care by executive order in January to replace former Gov. Jim Doyle’s Office of Health Care Reform. In the order, Walker tasked the office with ensuring that Wisconsin “maintains a vibrant, competitive health insurance market that is consumer driven and is based on free market principles.”

The office was also asked to explore “all opportunities and alternative approaches that would free Wisconsin from establishing a health benefit exchange, including federal waivers.”

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