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As the Dust Settles, 18 States and the District Opt for a State Exchange

By Jane Norman, CQ HealthBeat Associate Editor

December 14, 2012 -- When a deadline for a final decision expires at midnight Friday, it appears likely that 18 states and the District of Columbia plan to set up their own state-based health insurance exchanges to launch in 2014.

But in the rest of the nation, either the Department of Health and Human Services will run the exchanges or the states will participate in a state–federal partnership with Department of Health and Human Service (HHS). Iowa's Republican governor announced Friday that his state would pursue a partnership, though he said he also reserved the state's right to withdraw.

In another development late Friday, Utah Gov. Gary Herbert said in a letter to HHS Secretary Kathleen Sebelius that he intends to ask her agency to certify Utah's existing state exchange as compliant with the health care law. While the exchange likely won't meet standards set in the law, and Herbert acknowledged it is "atypical," he also said it should serve as the minimum standard for all exchanges.

He asked that Sebelius closely examine the Utah version. "I am confident that when you do, you will find that it meets the broad goals and objectives" of the law, the governor said.

While HHS officials have vowed that states with federal exchanges will retain their traditional oversight of state insurance, the federal government will still play a larger role than had been anticipated, and many key details about federal exchange operations remain unclear.

In a federal exchange, HHS will make decisions about such policies as which insurance plans will be certified to sell their products in the new marketplace, how to run call centers where residents can get answers to questions about local health plans and what options will be available for small businesses. HHS officials stress that states can change their minds later if they want to move toward a partnership model or a state model in later years.

Meanwhile, New York, Kentucky, and the District of Columbia received conditional approval of their state exchange plans on Friday, joining six other states that received approval earlier this week: Colorado, Connecticut, Massachusetts, Maryland, Oregon, and Washington. Under the health care law (PL 111-148, PL 111-152), HHS must issue all conditional approvals by Jan. 1 for exchanges that can begin enrollment in October for the plan year beginning Jan. 1, 2014.

In a written statement, HHS Secretary Kathleen Sebelius said the approved states will be ready to move ahead in 2014.

"I applaud these states' commitment in achieving this milestone and moving forward to build a marketplace," she said. "Each of these states has made significant progress and in 10 months will be ready for open enrollment, where individuals will be able to purchase private health insurance plans."

Following complaints from governors that they were being forced to choose an exchange type before they had many details from HHS, Sebelius a month ago had extended the deadline for states to declare their intentions on a state-based exchange.

Avalere Health, a consulting firm, estimated that states with their own exchanges will enroll 2.8 million people in 2014, based on an enrollment model developed by the firm.

In a telebriefing with reporters on Friday, Chiquita Brooks-LaSure, director of coverage policy programs at HHS' Office of Health Reform, said officials also plan to announce more conditional approvals in the "near future" and they expect that most states will "play a role" in running their exchanges.

One will be Iowa, where Gov. Terry Branstad, a Republican opposed to the health care law, announced on Friday that the state will pursue a partnership arrangement with HHS for its exchange. Branstad had been under pressure from Democrats in the state legislature to make some kind of move toward an exchange.

He said in a letter to Sebelius that a health benefits exchange "will not improve the quality of health care, lower the cost of health care or make Iowans healthier." He said many questions also remain about how flexible the federal government will be in its requirements. In addition, he said the $15.9 million annual cost of building and maintaining an exchange would not be a "prudent" option.

But Branstad said he also had concerns that the federal exchange would be too intrusive and raise costs for Iowans, and that the state intends to minimize the federal government's regulation of insurance. The state also will retain control over its Medicaid and Children's Health Insurance Program, he said.

And given that HHS has extended deadlines and continues to issue draft rules, "Iowa reserves our right to amend our intentions," Branstad said.

In Utah, Herbert said in his Friday letter to Sebelius that it is becoming increasingly clear to him that there are many potentially detrimental features to a federal exchange. "Consequently, I intend to move forward with Utah's version of an exchange, and am requesting that you certify Utah's version of an exchange" as compliant with the law, he said.

"Utah is indeed atypical because we had already developed a working, consumer-focused, free-market-based plan for health reform, including our version of an exchange that addresses Utah's unique demographics, systems and needs before" the law was passed, he added.

An announcement was expected on Friday from the governor of Virginia, where there likely will be either a federal exchange or partnership.

In Florida, Republican Gov. Rick Scott believes there's not yet enough information available from HHS on which kind of exchange to build, press aides said Friday. But by not submitting a blueprint in time for the Friday deadline, Scott essentially is opting for a partnership or a federal exchange.

Scott on Nov. 16 asked for a meeting with Sebelius, but it hasn't yet taken place. "We are in contact now with the secretary's office and look forward to scheduling a time for the governor to discuss his concerns about the costs of an exchange and the expansion of Medicaid on Florida families," said Scott's press secretary, Jackie Schutz, in an emailed statement.

"At this time we do not have sufficient information on the cost of implementing a state health care exchange to Florida taxpayers, Florida businesses or Florida health insurance purchasers. We are looking forward to getting more information from HHS and the president," she said.

Here's a roundup of state decisions on exchanges as of late Friday:

  • Will operate a state exchange: California, Connecticut, Colorado, District of Columbia, Hawaii, Idaho, Kentucky, Maryland, Massachusetts, Minnesota, Mississippi, Nevada, New Mexico, New York, Oregon, Rhode Island, Vermont, Washington, and Utah.
  • Will do a state-federal partnership: Arkansas, Delaware, Illinois, Iowa, Michigan, North Carolina, West Virginia.
  • Leaving it to a federal exchange: Alabama, Alaska, Arizona, Georgia, Kansas, Louisiana, Maine, Missouri, Montana, Nebraska, New Hampshire, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Wisconsin, Wyoming.
  • No on state exchange; may do partnership or leave to federal exchange: Florida, Indiana, New Jersey, Virginia.

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