What’s the status of a health insurance exchange in Kentucky?

Jill Midkiff, spokeswoman for the Cabinet for Health and Family Services, said Kentucky has hired a planning vendor “to develop a list of detailed requirements and a potential operating model that is specific to Kentucky’s information systems environment.”

The exchange is meant to act as a marketplace in which individuals and employees of small businesses can shop and compare several plans that have coverage packages pre-approved by the state and federal governments. Medicaid recipients will also be able to get their insurance from the exchange. Right now, it has not been decided what plans will be offered, Midkiff said. It’s also unknown if the plans in the system will be available to everyone or if there will be some plans only available to Medicaid recipients and some only for individuals who qualify.

Who would qualify? People with an income of up to 133 percent above the federal poverty level — now $14,404 for individuals and $29,326 for a family of four — will qualify for Medicaid starting in 2014. Also, the federal government will give subsidies to help Americans whose income is up to 400 percent above the poverty level. With them, they must buy private coverage through the exchanges.

Kentucky has until Jan. 1, 2013 to create a state-based exchange. If lawmakers do not introduce and pass legislation that will create an exchange, the state has two options. It can allow the federal government to operate the exchange or Gov. Steve Beshear can issue an executive order to create one. Beshear “has taken a wait and see approach to exchange planning, neither explicitly endorsing nor refusing to implement a state-run exchange,” reads a state-exchange profile put together by the Henry J. Kaiser Foundation.

Kentucky started planning for an exchange in September 2010 and received a total of $8.6 million to do so prior to receiving the $57.8 million grant. Midkiff pointed out most of the activities for this latest grant “must be completed regardless of whether the state or federal government operates the exchange.”

Last September, state officials said the delay in setting up an exchange was largely because the federal government had not decided what benefits needed to be offered in the exchange. In December, the Obama administration put the onus on states to come up with their own regulations pertaining to what benefits insurance companies have to offer. When asked if the change has allowed Kentucky to move forward, Midkiff said the Cabinet for Health and Family Services is working with the Department of Insurance to review the new dictate.

While the state does not have an estimate of how many people will use the exchange, Julia Costich, chair of the Department of Health Services Management at the University of Kentucky, said her research shows about 400,000 Kentuckians will be eligible for federal subsidies. After coverage expands, she estimates about 1.1 million Kentuckians will be eligible for Medicaid.

So far, 30 states and the District of Columbia have received grants to set up exchanges. Of those, only 13 and D.C. have adopted a plan for how to proceed.