States Pick Their Teams, Readying for Health Insurance Exchange Deadline

As the December 14 deadline nears, states are lining up on each side of party lines in the stand off over involvement in health insurance exchanges. Now that the election is over several states aren’t waiting until the last minute to reveal their opposition to participation in health insurance exchanges. Although the federal government will take over control of exchanges in these stand-off states, at what point will these state refusals affect the entirety of the health insurance exchange program?

Under the Affordable Care Act, states originally had until Friday, November 16, to inform the Obama administration whether they intended to set up their own exchanges or instead leave it up to the federal government. As the deadline approached, however, HHS Secretary Kathleen Sebelius made the move to extend the deadline until December 14 under what many view as an acknowledgement that states weren’t ready to join the new health insurance exchange program.

One by one, states are signaling that they are out. Arizona is the most recent of  seventeen states choosing to stand up and oppose health insurance exchanges. In a statement, Governor Janice Brewer commented that, “Though I am a steady advocate of local control, I have come to the conclusion that the State of Arizona would wield little actual authority over its ‘state’ Exchange. The federal government would maintain oversight and control over virtually every aspect of our Exchange, limiting our ability to meet the unique needs of Arizonans and the Arizona insurance market.”

Brewer’s group of state opposition is growing. Every few days since the middle of November, we’ve heard from other governors, such as Mary Fallin, of Oklahoma. According to Fallin, “after careful consideration, I have today informed U.S. Secretary of Health Kathleen Sebelius that Oklahoma will not pursue the creation of its own health insurance exchange,” Fallin said in a press release. “Any exchange that is [health care reform] compliant will necessarily be ‘state-run’ in name only and would require Oklahoma resources, staff and tax dollars to implement.”

But there are the states on the other side as well. Up to this point, six states are planning to pursue a state-federal partnership exchange: Arkansas, Delaware, Illinois, Michigan, North Carolina, and Ohio.  Michigan and Arkansas. Governors have indicated their preference for a state-based exchange and they continue to work with their legislatures to press for the passage of authorizing legislation. Illinois has also signaled that it will move to a state-based exchange in 2015. According to Kaiser, while only a few states have committed to a partnership to date, this option may become an increasingly viable strategy for the states that remain undecided. States that are not ready to run their own exchanges in 2014 may transition from a partnership exchange to a fully state-based exchange at a later date when they have the capability, though they must receive approval for their exchange at least 11 months prior to the start of coverage.

Many fear that if the exchanges do not quickly take shape, disorganization will significantly slow the development of the health insurance exchanges as well as health reform in general. Six states may not be enough to work through the ups and downs of getting things going. According to a Kaiser Health report, “Health law critics theorize that by refusing to set up exchanges, states could also carve a hole in the provision that requires individuals to either obtain insurance or pay a tax as a consequence of choosing not to, which the Supreme Court upheld in June. And if states could disable both the employer mandate and part of the individual mandate, they could wreak havoc with the law’s overall operation.”

Right now, state involvement in health insurance exchanges versus outright denial to participate is about even on each side. And time will tell how many end up on each side, and whether the stand off actually has an effect on the exchanges.