By Jane Norman, CQ HealthBeat Associate Editor
With the Supreme Court ruling on the health care law in the rearview mirror, states face increased pressure and scrutiny to get on with the job of establishing the health benefits exchanges set to launch in 2014.
Some states have moved forward aggressively on exchange implementation, others have begun but then stalled and still others have taken little action as they watched the battle over the law raging in the courts. The 5-4 ruling upholding the health care law (PL 111-148, PL 111-152) won't change the politics in states where Republicans are hostile to the measure. But policy experts say the court's opinion clears the way for those states that were well on their way. And the decision may give a hard nudge to others to get moving.
Linda J. Blumberg, a senior fellow in the Health Policy Center at the Urban Institute, said the pack of about 15 states that have been charging aggressively ahead and likely will debut state-run exchanges will gain additional "strength and support" from the ruling. More may follow. "I do think a lot of states that have been waiting will start to move forward," added Blumberg.
However, Alan Weil, executive director of the National Academy for State Health Policy, cautioned that every state has different politics, and some governors and state lawmakers will insist on waiting for the results of the November election and to see if the GOP takes the White House and possibly all of Congress. In states that don't establish a state exchange or state-federal partnership or can't get either together soon enough, the federal government will operate an exchange.
"States are now ground zero for health reform," wrote Paul Keckley, executive director of the Deloitte Center for Health Solutions, in a memo last week. "The law puts enormous pressure on states to act quickly and decisively."
The Department of Health and Human Services, underlining that fresh sense of urgency, recently announced 10 new opportunities for states to apply for federal money that will be awarded through Dec. 31, 2014. The move establishes a sort of funding on-ramp for states that might not be ready to run their own exchanges and could instead begin with a state-federal partnership that could eventually lead to a state operated exchange.
HHS Secretary Kathleen Sebelius, making her first public remarks since the ruling, said in a conference call with reporters that 34 states and the District of Columbia so far have received $850 million in Level One and Level Two exchange grants. The exchanges will serve as marketplaces for the sale of individual and small group policies, allowing consumers to compare many choices of plans and, in some cases, receive tax credits to subsidize their coverage.
The new grants "will be available to all states no matter where they are in the process of setting up their marketplace and no matter whether they plan on running it themselves, partnering with another state or partnering with the federal government," said Sebelius. "As we've said all along, we're going to be working with states every step of the way." Meetings across the country are planned in July bringing together state officials and HHS officials, she said.
"Looking ahead we're going to keep working closely with states and other partners to implement the law," she added.
Grant applications will be due beginning Aug. 15, 2012, and notices of grant awards are expected to be made 45 days after applications are due.
Some States on Track
The exchanges have gotten off to a strong start in about 15 states that likely would be expected to meet a November HHS deadline for proposals for state-operated exchanges. Maryland is regarded as one of the most advanced, as well as Rhode Island, Oregon and New York.
About 18 other states are studying their options, according to a Kaiser Family Foundation roundup. They include Indiana, Iowa, Montana, Ohio and South Dakota. Arkansas is planning for a partnership exchange. Another 14 states have seen "no significant activity," including Alaska, Florida, Georgia and Missouri, says Kaiser.
Three states have decided they will not build a state exchange, including New Hampshire, where the governor recently signed a law actually barring establishment of an exchange. "So we've passed the point of creating our exchange," said Colin Manning, press secretary to New Hampshire Gov. John Lynch. He pointed out the law does allow the state to participate in a partnership with the federal government. "We've been preparing to implement the law and now that the decision has come down we'll continue to move forward," Manning added.
But there are many obstacles even those states that want to have their own exchange. Blumberg said a major issue is the development of information technology and computer systems that can support the exchange and then integrating them with a state's Medicaid system. "It's clearly the issue that's waking folks up in the middle of the night," she said. "They're working with Medicaid systems that really are dinosaurs."
An industry insider who spoke only on background outlined more challenges. He forecast problems for the federal government in laying the groundwork for federally run exchanges in states opposed to the health care law, even though it's necessary to start doing so if the 2014 deadline is to be met. "For CMS to step in in that environment would position the administration against significant states where the governor is and has been opposed and where the state legislators have been opposed," said the insider. "I don't see that happening before an election."
Nonetheless HHS officials insist they are on schedule for implementation by 2014. On the call with Sebelius, CMS officials said they anticipate receiving 10 applications for previously announced grant funding before the deadline, including from some states that hadn't previously asked for exchange establishment grants.
California is one state moving ahead. An information sheet from the state's California Health Benefit Exchange estimates that 4 million state residents will enroll in subsidized coverage through the exchange or in Medi-Cal when the law is fully implemented, and another 2.1 million people will buy coverage without subsidies through the exchange or outside it. The California exchange became operational in January 2011 and in August received $39 million in a federal establishments grant. The exchange has hired 36 permanent staff members.
By contrast, in Kansas, Republican Gov. Sam Brownback returned a $31.5 million exchange grant in 2011 and Republicans in the state legislature are opposed to implementation as well. The Kansas Health Institute News Service recently reported that Insurance Commissioner Sandy Praeger said the state could still partner with the federal government, allowing state officials to set their own rules on their participation. But Praeger, also a Republican, said she won't oppose Brownback and plans to talk with him again about what to do about the exchange, the news service said.