States’ Progress in Development of Health Insurance Exchanges

A key feature of the Patient Protection and Affordable Care Act (PPACA)  (P.L. 111-148) is the creation of health insurance exchanges, where uninsured individuals will shop for individual and small group coverage. By November 16, 2012, states must notify CMS whether they will operate their own health insurance exchanges, partner with the federal government, or have an exchange run entirely by the federal government. A “soft deadline” for states to notify CMS of the essential benefits that health plans must offer passed on October 1, but many states did not meet it, including two that had previously been working hard at developing their exchanges.  Still, the exchanges must begin to help consumers with enrollment in qualified health plans a year from  now.

According to the Kaiser Family Foundation, which is monitoring the development of exchanges in the states, as of September 27, 2012:

  • 15 states and the District of Columbia have established their own exchanges;
  • Three states have chosen “partnership” exchanges;
  • 16 are studying their options;
  • Eight have affirmatively decided to let the federal government handle it; and
  • Eight have not taken any action.

Initially, nearly all the states accepted federal planning grants for the initial development of their exchanges. Florida Governor Rick Scott  and Louisiana governor Bobby Jindal returned their states’ grants in early 2011. New Hampshire’s legislature directed the return of $666,000 that had not been spent. Texas Governor Rick Perry returned $900,000 of the state’s $1,000,000 award  in March 2012. Not surprisingly, these are the states that have rejected establishment of state exchanges.

In its Final rule on establishment of the exchanges, CMS offered states three options, allowing them to assume some functions of the operation of the exchanges while working in partnership with them on others.  The states do not get to decide whether an exchange will operate within their borders, only the extent to which they want to control it.

In some states, divisions both between and within the legislative and executive branches have led to delay, confusion and a narrowing of options. In Idaho, when the 2012 legislative session ended without action on the exchanges, Governor Butch Otter convened a committee to investigate the options and make a recommendation. On October 9, 2012, the committee’s consultant from KPMG LLC told the members that there was not enough time for the state to develop and operate its own exchange by the deadline. The state must choose between ceding all authority over the exchange to CMS or working with the federal government in a hybrid partnership exchange. Either choice would require the state to work together with the federal government.

Indiana Governor Mitch Daniels signed an executive order in January 2011 directing the establishment of a state-operated exchange,  reasoning that the state should maximize its control over the activities. Apparently, the order was  never implemented, because the current candidates for governor are debating whether to work in partnership with the federal government or to remain uninvolved.

In Mississippi, Insurance Commissioner Mike Chaney (R) is proceeding to develop the exchange, despite a directive from Governor Phil Bryant (R) not to do so. According to Bloomberg News, Bryant will resist any implementation whatsoever of PPACA. Chaney believes that the federal government would impose more onerous requirements than the state exchange and that resisting laws we don’t like is a losing battle. Similarly, in Kansas, Governor Sam Brownback has refused to take any action to implement PPACA, but Insurance Commissioner Sandy Praeger held meetings seeking public input about the exchanges.

Opponents of PPACA expect that Mitt Romney will be elected President and they won’t have to implement it. If President Obama is reelected, they’ll need to run to catch up. It’s also quite possible that Romney would not get the cooperation of Congress or the blessing of the American people to “repeal Obamacare” if that means losing the protections for individuals with preexisting conditions, benefits for adult children until age 26, or rebates from health plans that don’t meet the medical loss ratio requirements.