* Would give states sliding deadlines to set up exchanges
* U.S. softens previous 2013 commitment date
* Proposal also aims to encourage chronic patient coverage
* Index of health insurer stocks falls 2.6 pct (Adds risk adjustment plans, stock movement)
By Alina Selyukh and Anna Yukhananov
WASHINGTON, July 11 (Reuters) - The Obama administration offered U.S. states more flexibility in setting up new health insurance exchanges, an apparent effort to bring local authorities on board with a key part of a healthcare overhaul.
The U.S. Department of Health and Human Services proposed on Monday a sliding deadline for states to set up the exchanges, relaxing a previously strict 2013 date to commit to a plan and be ready start by 2014.
States, insurers, and other key players like hospital systems have sought greater clarity on how these insurance marketplaces will work since President Barack Obama’s landmark healthcare became law last year.
The lack of details about exchanges and the heated political debate around the healthcare law itself -- including dozens of lawsuits questioning whether it is consistent with the U.S. Constitution -- have led to worries that states are falling behind the schedule.
“This takes off the table the argument that if you can’t get it done by Jan. 1, 2013, then you shouldn’t bother trying,” said Frank Micciche, senior health policy adviser with McKenna Long & Aldridge’s health insurance exchange practice.
“The danger there is that you lose the action-inducing hard deadline,” he said.
The idea behind the exchanges is to create easy access to an open marketplace of insurance plans and to allow uninsured people and small businesses to band together to negotiate cheaper rates for healthcare coverage.
The insurance exchange proposal also aims to encourage broad coverage by giving insurance companies incentives to enroll patients with chronic conditions, who typically have more expensive needs.
Major insurance companies such as Wellpoint WLP.N or Aetna (AET.N) that include such patients will get funds from insurers that only enroll cheaper, lower-risk patients. During the transition period from 2014 through 2016, all insurers will make payments to a non-profit that will then distribute funds to those insurers that cover the high-risk patients.
The S&P managed health care index .GSPHMO, that includes the stocks of major health insurers, fell 2.6 percent on Monday.
HHS is taking comment on its proposal and could make further changes before making the rule final.
The Congressional Budget Office estimates about 9 million people will use the exchanges in 2014, with the number growing to 23 million by 2017. Overall, of the roughly 47 million uninsured people in the United States, the healthcare reform would extend health insurance coverage to about 30 million.
States had originally faced a deadline of Jan. 1, 2013, to decide whether they would participate in the program and, if they said yes, to set up an oversight board and the technology infrastructure.
Now, the states can get conditional approval to participate if the Department of Health considers them in “advanced preparation” by that date. Even then, states that are not ready with fully operational exchanges by the final 2014 deadline can start at the beginning of 2015 or any following year.
The lack of specifics on healthcare exchanges had left some states in the lurch as many struggled to set up the basic structure of the exchanges on a tight deadline.
The greater flexibility could encourage more states to commit to the program, though it may also push back implementation.
“A lot of states are not ready to jump into this,” said Edmund Haislmaier, a health policy expert at the conservative Heritage Foundation. “They’re simply trying to accommodate the reality.”
The Obama administration has already faced problems in getting people to participate in its new healthcare programs. In May, health regulators slashed the premiums for health insurance plans that cover people with pre-existing conditions in order to encourage more participation.
Only about 18,000 people enrolled in the so-called high-risk coverage since the program began last year, well below original estimates of at least 200,000 people. [ID:nN3160105]
Most Republican-run states still reject the notion of supporting “Obamacare” reforms, though they must weigh the possibility of opening their state healthcare systems to more federal scrutiny if they refuse to set up exchanges.
As part of the health reform law, states that opt out of setting up exchanges -- on their own, with other states or in a partnership with the federal government -- must allow the Department of Health to come in and do it all itself.
“What this (proposal) doesn’t answer is how the federal government will use the flexibility when it is in charge,” said Alan Weil, executive director of the National Academy for State Health Policy, a non-partisan public policy think tank.
So far, only 10 states have passed or enacted legislation authorizing exchanges under the Affordable Care Act, according to research from the nonpartisan Center on Budget and Policy Priorities.
Seven states have pending bills, while legislation has failed, expired or been withdrawn or vetoed in 16 states -- though some states are doing research or other work without approving bills.
Two states, Louisiana and Florida, have already said they will not set up their own exchanges, leaving the responsibility to the federal government. (Reporting by Alina Selyukh, Anna Yukhananov and Andrew Seaman; Editing by Tim Dobbyn, Gary Hill)