BETHESDA, MD – If Congress creates a national health insurance purchasing exchange or a public health insurance plan that would compete with private insurers through the exchange, it should consider establishing federal coverage and underwriting rules that would pre-empt existing state standards.

Tim Jost, a professor at the Washington and Lee School of Law, makes this argument in an article published this week in the journal Health Affairs. Jost says the new federal standards would apply to all health plans, public and private, within the exchange, and also to all insurers that compete with the exchange.

Uniform federal coverage and underwriting rules may be necessary, Jost says, because insurers participating in purchasing exchanges can end up with disproportionate numbers of older and sicker enrollees if coverage and underwriting standards are more liberal within the exchange than outside it. Similarly, he says, if a new public plan applies less restrictive standards than the private plans it competes with in the exchange, the public plan could become the victim of "adverse selection" and end up with more than its fair share of expensive enrollees.

In his article, "Health Care Reform Requires Law Reform," Jost surveys the ways in which federal and state healthcare regulations interact with and limit each other. He also examines the effects of both federal and state laws on private actors.

Jost describes the legal reforms that may be necessary if Congress enacts comprehensive health reform, if the states end up taking the lead on reform, or if only limited health reform occurs.

If Congress Takes The Lead On Reform

The federal government's most effective tools for promoting more integrated healthcare delivery are the payment policies of federal health insurance programs, particularly Medicare, Jost says. Were Medicare to move away from its current "siloed" payment system toward "bundled, value-based payments," he says, "realignments of relationships within the delivery system could be dramatic."

Jost argues that federal law changes should be considered to accommodate these new relationships and a new, more integrated healthcare system.

"In particular, new safe harbors from the self-referral, antikickback and civil money penalty laws, and possibly new interpretations of the antitrust and tax-exempt organization laws, could expedite positive changes," he says.

Changes might be needed in state laws as well, he says, such as scope-of-practice restrictions that discourage the effective use of nonphysician medical providers and state privacy laws that complicate the collaborative treatment of patients.

If Reform Remains With The States

If Congress does not enact comprehensive national reform, Jost says it should give states more authority to regulate the health insurance benefits provided by self-insured companies, which include most of the nation's biggest businesses.

"Congress should also give the states broader discretion to expand Medicaid coverage – for example, to include childless adults or unemployed people with incomes below certain levels," Jost writes.

If Health Reform Is Limited In Scope

If only limited health reform occurs in Congress and state legislatures, Jost says there is still much that federal agencies can do to facilitate private reform.

"The Centers for Medicare and Medicaid Services, for example, has broad authority to sponsor demonstration projects in Medicare and Medicaid," he writes. And the Office of Inspector General at the Department of Health and Human Services "has discretion to issue safe harbors and advisory opinions to protect innovation in provider/professional relationships."