States squirm over health exchanges
By: Jason Millman
November 28, 2011 11:11 PM EST
For state governments, the coming Supreme Court ruling on health reform isn’t an abstract argument about the U.S. Constitution.
It’s a highly practical question about whether, when and how to proceed with one of the health law’s most important and complicated pieces: setting up health insurance exchanges. Already facing political strife over implementation of health reform, some states are wondering if they should sit tight on exchange decisions until the court rules, probably in June.
Set to open in January 2014, exchanges will offer a marketplace where individuals and small businesses in each state can shop for health coverage. The exchanges, which offer subsidized coverage to lower- and middle-income individuals, will absorb more than half of the law’s projected expansion of health coverage to 32 million people.
Like many of the law’s provisions, the onus falls on states to take on much of the work of setting up the exchanges, with the Department of Health and Human Services running an exchange in states that fail or choose not to create one.
For some conservative states trying to block the law in the Supreme Court, the idea of federal intervention is enough motivation for them to plan ahead for an exchange in case their lawsuit fails. In others, the Supreme Court’s consideration of health reform is a cause for paralysis.
Two Midwestern governors have already declared their states won’t set up an exchange until the Supreme Court decides on the health law. And that idea is growing popular among powerful state legislators vigorously opposed to health reform.
Even without the uncertainty surrounding the Supreme Court, states are already on a tight timeline to get exchanges in working condition. Though the exchanges open in January 2014, HHS must determine by Jan. 1, 2013, whether a state will be ready to run one. The last opportunity for states to receive federal financial assistance for building an exchange is the end of June 2012 — right around the time of the Supreme Court ruling.
Recognizing the heavy lift for states’ exchanges, HHS in September floated ideas for partnership exchange models in which the states would split exchange responsibilities with the feds. But the models were met with grumbles from the states, which found them too restrictive.
Steve Larsen, who oversees exchange development for HHS, said he’s heard from states that are hesitant to do too much ahead of the Supreme Court decision. However, he thinks that states won’t want to fall too far behind if the Supreme Court upholds the law in June.
“If that’s when they start to work on an exchange, they will certainly be challenged to have a state-based exchange in 2014,” Larsen told a conference of Medicaid directors earlier this month.
But it’s an argument that Missouri state Sen. Scott Rupp isn’t buying. Rupp, a Republican who chaired the state’s interim exchange study committee this fall, said Missouri should hold off planning entirely until the Supreme Court has its say. Doubtful that the feds have the resources to set up exchanges in every state that declines, Rupp isn’t worried about the health law’s tight deadlines.
“I think there’s plenty of time,” Rupp said. “We don’t care about the timeline the federal government has laid out. We’re a sovereign state. Just because they throw down a deadline, we don’t have to scramble to hit it.”
In Wisconsin, Frank Lasee, the Republican chairman of the state Senate insurance committee, is looking beyond the Supreme Court decision. Lasee wants to know who wins the 2012 elections before Wisconsin confronts health reform. He recently killed a bill that would have written into state law many of health reform’s insurance provisions, such as banning lifetime and annual limits, preventing discrimination against people with pre-existing conditions and allowing young adults to stay on their parents’ insurance until age 26. The bill wouldn’t have created an exchange, though.
“Exchanges really aren’t required until 2014, so we have plenty of time after November 2012,” Lasee said, even though it would leave the state less than two months until the January 2013 certification.
Just 13 states have passed exchange legislation in the 20 months since health reform became law, and some of those states face further legislative battles to design the exchange. Five governors have taken some form of executive action to continue exchange planning after legislatures balked, with only Rhode Island’s Lincoln Chafee flexing executive muscle to actually establish a functioning exchange. It’s hard to imagine many more governors taking similar action without facing the wrath of state legislators.
Some Democrat-led states are further ahead in the planning process. Maryland and California have had functioning exchange boards in place for months, while Connecticut and Vermont are trying to align their exchanges with new state initiatives that aim for universal coverage.
Some states that have set the Supreme Court decision as a symbolic marker continue their exchange planning. Both Kansas Gov. Sam Brownback and Nebraska Gov. Dave Heineman have ruled out an exchange until after the Supreme Court’s decision, but “just-in-case” policy discussion has not disappeared.
Though Kansas this summer sent back a $31 million grant to build an exchange, an advisory committee continues to meet and a special legislative panel recommended that the legislature continue to pursue a state-run exchange again in January.
Likewise, Nebraska continues to make inroads, recently applying for millions more in federal grants to plan an exchange. Insurance Commissioner Bruce Ramge said the grant would position the state well for designing an exchange, if it comes to that.
“We also continue to have frequent stakeholder meetings with interested parties,” Ramge said.
Exchange planning is even taking place in Gov. Rick Perry’s Texas, which this year approved a “health care compact,” a symbolic agreement among conservative states to take control of federal health programs and reject health care reform. Stakeholders in the state said some legislators are planning for an exchange behind the scenes after receiving a $1 million HHS grant last year.
“I’ve talked to members who are on board,” said Jared Wolfe, executive director for the Texas Association of Health Plans. “They say they get it, an exchange is a good idea, but politically can’t vote on it right now and want to wait until the Supreme Court decides.”
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