With the the Patient Protection and Affordable Care Act (PPACA) upheld by the U.S. Supreme Court, half of the states in the nation now face a federally run health care exchange, the default for states that haven't made progress or declined involvement in setting up a state run marketplace for health insurance coverage.
See also: State-Based Exchange Status Map
Absent massive extensions which some say could still be granted by the Administration, the landscape for health insurance could be a federally-run system for administration, enforcement and assessment of insurers for at least half the nation.
National Association of Insurance Commissioner (NAIC) officials have said it is too late to start a state-based exchange if work has not already been underway for a while, and still meet the deadlines imposed by the U.S. Department of Health and Human Services (HHS), with open enrollment beginning in October 2013.
Half of the U.S. states (26) at most, including the District of Columbia, will be ready for open enrollment in October 2013 for a start date of the following year, according to the most recent NAIC tally given at a press conference earlier this week here in Washington.
State and federal health care industry lobbyists estimated that 12 or 13 states have moved beyond the legislative adoption or decree, and beyond the initial grant awards, to start the back office and information technology work needed to set up an exchange. But lobbyists have questioned whether the 26 counted is too generous a number to make it to the finish line by Jan. 1, 2014.
A closer deadline approaching is the Nov. 16, 2012 date for states to file an exchange plan if they are going to form a state or a federal-state partnership.
Several states that had put their foot down and said they weren't moving forward are now exploring setting up an exchange; other governors have sent their grant money back, while others are now wondering what a federal "partnership" would look like and who would pay for certain aspects of it. Other questions include the role of producers, the applications of solvency, how to handle complaints and market conduct issues brought before the state departments and how to feed that information to the exchanges, and how to add completion to the exchanges, the bottom tier of which must satisfy the mandates of the essential health benefits guidelines.
The law's anticipated implementation in states that have foregone a state-based exchange or state-federal partnership would appear to fly in the face of those states' wishes to retain all control over insurance markets.
The Patient Protection and Affordable Care Act (PPACA) of 2010 calls for federal and state agencies to set up state-based health insurance exchanges, or Web-based insurance supermarkets, that individuals can use to sign up for public health insurance programs or use new subsidies to buy commercial coverage.
States are to choose whether to set up their own exchanges or let HHS provide exchange services for their residents.
Congressional Republicans, including those on the House Energy & Commerce Committee have decried the decision and its possible "costly mandates and taxes" but want "to preserve state flexibility and avert the spending explosion," in the words of Committee Chairman Fred Upton, R-Mich., after the decision today.
"The states continue to have a strong incentive to set up the exchanges. Otherwise, they lose a level of regulatory authority. Whether that is sufficient remains to be seen," stated Robert Weiner, a partner at Arnold & Porter here in Washington and a former associate deputy Attorney General at the U.S. Department of Justice, where he oversaw the defense of the new healthcare law from the outset of litigation through the arguments at the Supreme Court.
Without specific action by a state, HHS will enforce the insurance reforms.
HHS will only allow a state to enforce the reforms if HHS determines that it is substantially enforcing the reforms, as one Washington insurance lawyer noted.
"However, since states cannot enforce federal law, the states will need to enact the reforms at the state level in order to meet the requirement of substantially enforcing the reforms," noted Chris Petersen, insurance regulatory lawyer and partner at Morris, Manning & Martin, L.L.P., in Washington.
"I think there is going to be a lot more interest now in what the states are doing," said Sandy Praeger, Kansas insurance commissioner and head of the NAIC's Health Insurance (B) Committee.
In Kansas, Gov. Sam Brownback has sent back $31 million of early innovator planning grant funds for the Exchange, and has said he wants to wait until after the election to make a decision on a state exchange. There was no legislative support for a state-based exchange, anyway, Praeger noted.
Praeger continues to press on, despite some awkward questions from the press that placed her in a different position than that of her governor.
"We still have a chance of exploring the state-federal partnership … We want to continue to explore that option," Praeger said. Praeger, as an elected commissioner, said she could pursue a state-based exchange through a declaration letter, although it was not her intention to do so and would not move forward without the government's support. She stressed flexibility, but acknowledged a difference of opinion. Praeger repeatedly said it was her hope to do some elements of the exchange, such as consumer assistance and plan management certification, because she thinks it would be in the best interest of her citizens, and the broker community to do so, to oversee those plans. But, she added, "Time may run out on us." Praeger said there was no wiggle room in the deadlines for exchange readiness. They are written into the law, and HHS knows that.
Praeger said it was important that the state retain some regulatory authority.
Of concern, on the Medicaid portion of the ruling, she worried about the potential for many folks to fall through the cracks and said "we have to address that in some way."
On the other hand, a few states, like New York are standing by, ready to enforce.
"My office stands ready to enforce the Affordable Care Act to ensure that all New Yorkers will benefit from the law's protections," stated New York Attorney General Eric T. Schneiderman in response to the Supreme Court's decision today.
