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In the States, Heat—but No Light—on Exchanges

By John Reichard, CQ HealthBeat Editor

April 15, 2011 -- The extent to which states will ultimately decide to create health insurance exchanges under the overhaul law remains uncertain—but what is clear is that the controversy surrounding that issue is heating up in state capitals.

Also coming into focus is a major effort big corporations will mount to shape the exchange-related legislation that states do adopt.

During the week of April 11, Maryland adopted a measure to create an exchange under the overhaul law and Oklahoma underscored its opposition to creating one by returning a $54 million federal "innovator" grant. The money was to be used to set up an information technology system to help operate the exchange. The system Oklahoma would have developed was intended to be a model for other states.

Oklahoma also announced it would return a $1 million grant it received last August to conduct health insurance premium rate reviews.

The week also saw the launch of the "Choice & Competition Coalition" which will urge states against creating the type of exchanges that will function as "active purchasers." Under that form of exchange, operators would use their negotiating clout to bargain hard for consumers and exclude plans that don't offer good value. California has passed a law that permits its exchange to do just that.

But the high-powered coalition is fighting that on the grounds that wider choice better serves consumers. Members of the coalition include America's Health Insurance Plans (AHIP), the Blue Cross Blue Shield Association, the Pharmaceutical Research and Manufacturers of America (PhRMA), the U.S. Chamber of Commerce, the National Retail Federation, and the National Association of Health Underwriters.

"Many stakeholders agree that exchanges must be true marketplaces that maximize choice and competition so that consumers and small businesses can purchase the plan that best meets their needs," said Robert Zirkelbach, spokesman for AHIP.

Federal officials say they would like all states to create their own exchanges rather than have Uncle Sam step in and do the job. But states like Florida, Alaska, Georgia, Oklahoma and Mississippi that oppose the health law (PL 111-148, PL 111-152) as overly intrusive aren't moving ahead on exchanges—even though their inaction could bring greater federal control over their insurance markets, not less.

It's not entirely clear what will happen in those states, however. If the courts uphold the constitutionality of the health law it's possible they would then decide to do their own exchanges.

In Mississippi, the state's insurance commissioner has said he has authority to move ahead with an exchange even though Gov. Haley Barbour has expressed opposition. In Georgia, efforts to move an exchange bill stopped after tea party activists objected to cooperating with "Obamacare."

Blue Cross Blue Shield Association spokesman Brett Lieberman said legislation to create exchanges has been introduced in 36 states and seven of those bills have passed. At least two states—Massachusetts and Utah—passed exchange laws before the health overhaul law was enacted.

In states that don't demonstrate to the satisfaction of the Department of Health and Human Services by Jan. 1, 2013 that they'll have a viable exchange ready a year later, federal officials will run the exchange.

It's likely that many states won't complete action on exchanges until next year, however.

Waiting will give state officials time to get a better sense of what standards federal officials will set for benefit packages. They also may want to see how the U.S. Supreme Court resolves the constitutionality of the law. But that strategy will leave little time to have exchanges in shape to gain federal approval by Jan. 1, 2013.

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