California's push to be the first in the nation to establish a health benefits exchange is being closely watched by other states as they act on implementing key elements of the national health care overhaul law.
Last week, California Gov. Arnold Schwarzenegger signed legislation that will establish a state-run health insurance exchange, which will open for business by 2014 and help millions of Californians obtain medical coverage under the federal law.
The debate in California is hardly over as the governor and Legislature soon begin considering appointments to the five-member oversight board that will be responsible for running the exchange -- and as the board begins its task of defining how the new exchange will operate.
"If California screws it up, it might have repercussions nationwide. ... So this really has to be set up right," said Dana Goldman, director of the Schaeffer Center for Health Policy and Economics at the University of Southern California.
"Whether these markets will function properly or not will depend on the decisions made in each state," Goldman said.
Some key decisions were written into the legislation, including the formation of the independent oversight board -- a major point of controversy among critics, including the California Chamber of Commerce and some taxpayer groups, who assert that the new agency will lack adequate public accountability.
The nonpartisan Legislative Analyst's Office refuted that contention, however, saying "numerous provisions" are contained in the legislation "aimed at establishing public accountability in the operations of the exchange."
In an Aug. 31 analysis requested by the Assembly speaker, the LAO noted that board members, serving four-year terms, will be appointed by elected officials and its operations subject to open-meeting and public-disclosure rules as well as audits and annual performance reviews.
The LAO also noted that the new agency, which will be known as the California Health Benefit Exchange, will be similar to two existing government agencies -- the California Public Employees' Retirement System's health benefits division and the Managed Risk Medical Insurance Board, which administers the state's Healthy Families program.
Both agencies are administered by independent and powerful oversight boards.
The LAO, however, reserved its right to clarify and revise its analysis as "more information, such as the specifics in federal regulations, becomes available."
Schwarzenegger will have just a single day -- New Year's Day -- to make his two appointments before leaving office. Assembly Speaker John A. Perez and Senate President Pro Tem Darrell Steinberg each can appoint one member. The new governor's secretary of health and human services will be the board's fifth member.
The legislation bars insurance industry representatives, health care providers and others with direct conflicts of interest from taking a seat on the board.
"You need people with experience in these markets," said Goldman of USC. "These can't be just political appointees with the right friends. They need to have the technical expertise and the policy expertise."
When it opens, the exchange is expected to serve at least 3 million Californians, many of whom are currently uninsured.
Other states are watching California with interest as they consider their own options, said Kathleen Stoll, director of health policy for Families USA, a health advocacy group based in Washington, D.C. "What California is doing really sets some standards that could be useful to other states as they plan their own exchanges," Stoll said.
"I think there is a lot of debate right now on how independent to make their boards," she said. "California now provides a starting point, if not a model for other states."