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States Line Up for a New Infusion of Exchange Grants

By Jane Norman, CQ HealthBeat Associate Editor

November 29, 2011 -- Even with a legal challenge to the health care law awaiting oral argument before the U.S. Supreme Court, planning for exchanges continued to move ahead last week with an announcement of $220 million more in federal grants for 13 states.

Of the 13, eight are parties to the suit against the health care law (PL 111-148, PL 111-152) and nine have Republican governors.

Health and Human Services Secretary Kathleen Sebelius said in a conference call with reporters that more than half of all 50 states have made "significant progress" toward setting up state-based exchanges that will serve as marketplaces for individual and small business health insurance policies. She noted that 49 states and the District of Columbia have now accepted some portion of exchange funding grants.

But the path has not been smooth and may continue to be problematic when state legislatures that have adjourned meet early next year and again tackle the exchange question. Tea party members have been highly critical of Republicans in statehouses who continue the law's implementation.

Richard Cauchi, program director for the National Conference of State Legislatures Health Program, in a brief on the NCSL website said that some members of at least 45 state legislatures have proposed to limit, change or oppose the health care law.

In all, 18 states have passed binding legislation opposing elements of the health overhaul, says the NCSL.

States that don't have exchanges in place by 2014 will have to have federal exchanges instead. HHS, however, has been stressing flexibility in dealing with states and officials said in a fact sheet posted last week that grants could be awarded through Dec. 31, 2014, even for approved exchange activities after that date.

In states that don't set up exchanges, "to the greatest extent possible, HHS intends to work with States to preserve the traditional responsibilities of State insurance departments when establishing a Federally-facilitated Exchange," HHS said in the fact sheet. "Additionally, HHS will seek to harmonize Exchange policy with existing State programs and laws wherever possible."

Chiquita W. Brooks-LaSure, Director of Coverage Policy at HHS, said the Obama administration is encouraging states to continue to move forward. "It is a bipartisan concept to continue establishing exchanges," said Brooks-LaSure. She added that the Obama administration is confident the health care law will be upheld.

The high court is expected to hear oral arguments in March in a suit brought by 26 states, the National Federation of Independent Business and two individuals.

The states receiving grants were Alabama, Arizona, Delaware, Hawaii, Idaho, Iowa, Maine, Michigan, Nebraska, New Mexico, Rhode Island, Tennessee and Vermont. Of them, Delaware, Hawaii, New Mexico, Rhode Island and Vermont are not challenging the law in court.

Among the group, 12 states are receiving Level One grants that represent one year of funding. But Rhode Island is so far along that it has qualified for a Level Two grant, which goes to states that have made more progress in planning for their exchanges. The exchanges are due to begin operation in 2014.

Some GOP-led states have accepted small sums of exchange planning money but don't want more. Kansas, for example, in August returned a $31 million "early innovator" grant that was to pay for exchange development there.

The states and grants are:

  • Alabama, $8.5 million
  • Arizona, $29.8 million
  • Delaware, $3.4 million
  • Hawaii, $14.4 million
  • Idaho, $20.3 million
  • Iowa, $7.7 million
  • Maine, $5.8 million
  • Michigan, $9.8 million
  • Nebraska, $5.4 million
  • New Mexico, $34.2 million
  • Tennessee, $1.5 million
  • Vermont, $18 million
  • Rhode Island, $58.5 million

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