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An eye on the Supreme Court

By James Daly '13
June 8, 2012

Joel Ario '75 will be keeping a close eye on the United States Supreme Court this month.

The justices are expected to hand down their decision on the constitutionality of the Patient Protection and Affordable Care Act in the next few weeks, and that ruling will determine the fate of months of Ario's work.

The St. Olaf alumnus was the Obama administration's point person in developing the health insurance exchanges that became a key component of the law. The state-based exchanges, modeled on the private exchanges that increasingly serve employer-based markets, aim to help individuals and small businesses use new tax-credit programs to buy health insurance.

Prior to his role as the director of the Office of Health Insurance Exchanges at the U.S. Department of Health and Human Services, Ario served as the insurance commissioner in two states — Oregon and Pennsylvania — and led various state and national health-reform efforts. He holds a J.D. and an M.Div. from Harvard University and has more than 30 years of experience in crafting public policy.

Ario, who recently took a new job with Manatt Health Solutions, shares how he became an expert on insurance exchanges and why he thinks they're important to reforming health care.

How did you become interested in health insurance regulation?
I had been working with Public Interest Research Groups (PIRGs) for 13 years after law school and was ready for a new challenge when a close friend, who was the Oregon insurance commissioner at the time, asked me to help him figure out health reform. I said yes. The work was fascinating — we passed a major health reform bill in the 1995 legislative session under Governor John Kitzhaber — and I was hooked on a new career path.

Why do you think health insurance exchanges should be part of health care reform?
The Affordable Care Act (ACA) exchanges are modeled on the private exchanges that increasingly serve employer-based markets. The core elements are a web-based marketplace where consumers can go to browse their choices, compare them on various cost and quality measures, and purchase the best health plan for their families. Web-based purchasing offers many advantages over traditional distribution channels, and once the exchanges take hold, we will wonder why we tolerated the current market, with all its opaqueness, for so long.  

What was the most challenging aspect of designing the regulatory framework for the exchanges?
I came to HHS with a commitment to state-based exchanges, and the framework we established gives states maximum flexibility to tailor their exchanges to local market conditions and regulatory practices. But the ACA is a federal law, and there are important consumer protection standards that must be met by states to avoid defaulting to a back-up federal exchange. The toughest challenge was to find the right balance between state flexibility and minimum federal standards. For example, we want a consistent user experience when someone goes on a website to compare their health care choices, but we want those choices to be developed locally through a collaborative process among local stakeholders.

If the Supreme Court rules the individual mandate provision of the ACA unconstitutional, will there be a consequence for the health insurance exchanges?
Let’s go back to the large employer analogy. The group market has worked fairly well because it has been guided by two core principles. First, sick employees cannot be denied coverage or charged more because of preexisting conditions. Second, healthy employees cannot opt out and use their employer's contribution to go buy cheaper coverage. Relax either principle and there will be trouble: allow discrimination against sick people and rates will go down but everyone will be one medical emergency away from bankruptcy; allow healthy employees to pull out of the pool and rates will go up for the older and less healthy who remain.

The exchanges established by the ACA work on the same principles. So, yes, if individuals can opt out until they get sick, the exchanges will be in trouble — unless, of course, we find another effective way to prevent freeloading. Some very smart folks are working on options, such as auto enrollment with penalties for late enrollment, but none of these options will work as well as everyone insuring themselves before they get sick.

What is the primary focus of your work at Manatt Health Solutions?
My focus is the same as it was at HHS — working with states and other stakeholders to bring exchanges on line and achieve health security for all Americans. I miss being "in the arena" in the way I was at HHS, but I also have more time for my family and less stress.

Contact Kari VanDerVeen at 507-786-3970 or