With the passing of the Dec. 14 deadline for states to declare whether they
intend to run state-based insurance exchanges, a total of 18 states and the
District of Columbia appeared poised to run SBEs.
Department of Health and Human Services Secretary Kathleen Sebelius said in a
Dec. 17 blog entry
that 10 states had filed blueprint applications with HHS to set up SBEs under
the Affordable Care Act. Applications were filed by California, Hawaii, Idaho,
Minnesota, Mississippi, Nevada, New Mexico, Rhode Island, Vermont, and Utah. HHS
is to act on the applications by Jan. 1, Sebelius said.
In addition to those applications, HHS, the week of Dec. 10, gave conditional
approval to create state-based exchanges to Colorado, Connecticut, the District
of Columbia, Kentucky, Massachusetts, Maryland, New York, Oregon, and
Washington. Conditional approval means HHS has found that the eight states and
the District of Columbia have made enough progress in setting up their own
exchanges for individuals and small group plans that they are likely to be ready
to take applications when open enrollment begins Oct. 1, 2013. Plans sold in the
online markets will take effect in 2014.
“We know that some states will need more time before being ready to run their
own marketplace or want to run part, but not all of the exchange in 2014,”
Sebelius said. States can choose to enter into partnership exchanges with the
federal government, in which states conduct plan management and/or consumer
assistance functions, she said. The deadline for states to apply to be in
partnership exchanges is Feb. 15, 2013. The deadline for filing blueprint
applications to operate SBEs was Dec. 14.
Under ACA, HHS will operate federally facilitated exchanges (FFEs) in states
that do not set up their own SBEs or enter into state partnership exchanges
On Nov. 20 the administration released proposed rules regarding essential
health benefits and health insurance markets (see previous article). On
Nov. 30 it released a proposed rule on payment parameters for risk adjustment
programs (see previous article).
Sebelius said the proposed rules will “ensure states have more information to
continue their work.”
HHS is “not taking an 'all or nothing' approach to exchanges,” she said.
“Many states are making impressive progress and we are committed to working with
all states as we approach open enrollment in October 2013.”
Sebelius also noted in her blog entry that many states have received planning
and establishment grant
awards to develop information technology systems and perform other tasks to
create exchanges. Testifying before the House Energy and Commerce Health
Subcommittee Dec. 13, Gary Cohen, director of the Centers for Medicare &
Medicaid Services' Center for Consumer Information and Insurance Oversight, said
that $2.1 billion in exchange grants have been awarded to states (see related
Many states, especially those led by Republicans, have balked at creating
exchanges to implement the controversial health care reform law. “The story here
is that 32 states have refused to help the government implement this law in the
way that its authors envisioned,” Michael Cannon, director of health policy
studies at the libertarian Cato Institute, told BNA.
“That was unthinkable two years ago,” when ACA was enacted, he said. “It
speaks to how unpopular this law remains, how complex and costly the law is, and
how state officials expect that this law is not going to work,” he said.
Cato has argued against ACA, and Cannon has called for states to refuse to
set up the exchanges.
However, not all ACA opponents agree that states should avoid creating
Douglas Holtz-Eakin, president of the American Action Forum and a critic of
ACA, told BNA it would be preferable for states to create state-based
“It seems to me the silver lining in what's going on is that states who would
agree to do the exchanges are also in a good bargaining position with the
administration,” notably concerning the terms of expanding Medicaid, he
In frequently-asked-questions guidance issued Dec. 10, CMS told states they
will not receive enhanced federal funding if they decide to only expand Medicaid
partially, rather than up to 133 percent of the federal poverty level as called
for under ACA (see previous article).
Holtz-Eakin suggested states could bargain with HHS to “run their own-style
exchanges,” in exchange for fully expanding Medicaid. Otherwise, he said, “they
can say no, and the administration doesn't get their Medicaid expansion.”
A free market exchange is a conservative idea that should be embraced by
conservative states, Holtz-Eakin said. “If they don't seize this opportunity, it
goes past,” he said, and “a very conservative idea, exchanges, ends up being
lost in the regulatory overkill of the Affordable Care Act.”
Sarah Dash, research faculty and project director at Georgetown University's
Health Policy Institute, told BNA that many states may set up state-based
exchanges after 2014. “It takes a while to do the planning and preparation to
set up a state-based exchange,” she said.
Some states “were going to do it right from the get-go and really started
their planning,” she said. Other states, such as Illinois and Kansas, had
administrations or insurance commissioners that wanted to set up SBEs or
partnership exchanges, but they were unable to win approval from their
legislatures or governors, she said.
Other states waited for the U.S. Supreme Court to rule on the law in June or
for the result of the presidential election in November, and now it is too late
to create an SBE in time for plans to take effect in 2014, Dash said.
Many states complained that HHS took too long to release regulatory
information, especially on the FFEs, Dash noted. “There's probably a decent
amount of leeway there” for states that have moved to create SBEs in terms of
regulatory flexibility from HHS, she said.
The number of states likely to operate SPEs or have FFEs is not yet clear. On
progress map, as of Dec. 17, health care consulting firm Avalere Health LLC
estimated that 12 states would be likely to form SPEs: New Hampshire, New
Jersey, Delaware, North Carolina, Michigan, Ohio, West Virginia, Tennessee,
Illinois, Iowa, Arkansas, and South Dakota.
Twenty states are likely to have FFEs, according to Avalere: Maine,
Pennsylvania, Virginia, South Carolina, Georgia, Florida, Alabama, Indiana,
Wisconsin, Missouri, Louisiana, Texas, Oklahoma, Kansas, Nebraska, North Dakota,
Montana, Wyoming, Arizona, and Alaska.
Avalere estimated that 18 states and the District of Columbia would be likely
to have SBEs. Avalere included Utah, which already has an exchange, as likely to
operate a SBE. Utah has asked HHS to approve its exchange as an SBE.
On its map on
“where states stand so far” on exchanges, dated Dec. 17, the National Academy
for State Health Policy's “State Refor(u)m” health reform project lists 18
states and the district having declared their intent to establish an SBE, seven
states that are considering or have declared partnerships, and 25 states that
have rejected state-run exchanges.
NASHP lists Delaware, North Carolina, West Virginia, Michigan, Illinois,
Arkansas, and Iowa as likely partnership states. States rejecting state-operated
exchanges are Maine, New Hampshire, Pennsylvania, New Jersey, Virginia, South
Carolina, Georgia, Florida, Alabama, Tennessee, Ohio, Indiana, Wisconsin,
Missouri, Louisiana, Texas, Oklahoma, Kansas, Nebraska, South Dakota, North
Dakota, Montana, Wyoming, Arizona, and Alaska, it said.
By Sara Hansard
Sebelius's blog entry is at http://www.healthcare.gov/blog/2012/12/states-moving-forward121712.html.
HHS's fact sheet on exchange grants is at http://www.healthcare.gov/news/factsheets/2011/05/exchanges05232011a.html.
Avalere Health's exchange progress map is at http://www.avalerehealth.net/news/spotlight/20121212_Exchange_Progress_Map.pdf.
The National Academy for State Health Policy's exchange map is at http://www.statereforum.org/where-states-stand-on-exchanges.