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Governors Association Chief Says States Will Create Health Care Exchange

By Rebecca Adams, CQ HealthBeat

September 15, 2010 -- Even though many governors are resisting the implementation of the new health care law this year, National Governors Association Executive Director Ray Scheppach predicted that many governors will ultimately want to create their own version of the most significant part of the new system—the exchange markets that will begin in 2014. Despite the fact that officials in some states are suing the federal government over the law (PL 111-148, PL 111-152) and some are refusing to create their own high-risk pools this year as the law envisioned, Scheppach said that governors will want control over the insurance provided in their states.

"In the end, most states will, in fact, do the exchanges," Scheppach said Wednesday at a conference organized by the trade association America's Health Insurance Plans. If a state does not set up its own system, then HHS officials could come into the area and set up an exchange market there. Under a federally created exchange, governors might have less control over how much medical providers are paid and how the insurance system operates.

"There's a strong anti-Washington attitude out there," said Scheppach.

However, he said governors' level of interest depends somewhat on the amount of flexibility that Department of Health and Human Services officials give them as they write regulations. For instance, if HHS officials base the standard benefit design of an insurance plan on the equivalent of the actuarial value of an average BlueCross BlueShield plan, many states could meet that standard. But if HHS officials are very prescriptive in laying out precise details about how benefits are covered, officials in some states could walk away from creating their own markets.

Scheppach said that "there is a two-track kind of thing" happening, with governors simultaneously moving to implement parts of the law while complaining about it and even challenging it in the courtroom. He said that the NGA recently held a meeting in Vermont to explain the law to state officials and will have another one in two weeks in Seattle.

Some policy analysts have noted that only about roughly half of the states have set up their own temporary high-risk insurance plans this year. The health care law calls for high-risk pools to be set up in every state, but officials in each state have a choice of whether to set up the system themselves or allow the federal government to create it. But Scheppach said that this year's decisions about the high-risk pools are not a predictor of whether governors will want to set up their own exchange markets four years from now, in part because different officials may be in place then and in part because governors have an interest in tailoring the systems to the needs of their own constituents.

"I do not personally think that's any indication of what will happen in the exchanges," he said.

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