It’s official: The feds will run most Obamacare exchanges

February 18, 2013

Friday was a very important day for health policy days. It was the last day for states to tell the federal government whether they wanted any part in running the Affordable Care Act  health exchanges come 2014.

The federal government did not get many takers. Some of the most closely watched states, including Florida and New Jersey, decided to leave the entire task to the federal government. All told, the federal government will run 26 of the state health exchanges. It  also will partner with seven states, where state and federal officials take joint responsibility for the marketplace. Seventeen states and the District of Columbia will take on the task themselves. Here's what that looks like in map form, via the Kaiser Family Foundation.

As for the partisan breakdown, this graph should give you a sense of how politics played a role in state decisions. While you do see some Republican-led states running exchanges—and some states with Democratic governors passing up the opportunity—there is a definite split along party lines.

For those curious, the two states with Democratic governors defaulting into the federal exchange are Missouri and Montana. There are four states with Republican governors who are running health exchanges: Nevada, Idaho, New Mexico and Utah (although Utah has recently retreated from this position.) The one state with an Independent governor running a health exchange is Rhode Island.

The big question moving forward is: Does this split matter? Is it better or worse for the federal government to be running the majority of the state health exchanges?

In the health policy world, there are essentially two schools of thought on this. The first is that states opting out of the exchanges is horrible for the Obama administration. All along, Health and Human Services has urged states to move forward on their own. Now, HHS has the massive task of setting up 26 separate state exchanges.

“These are systems that typically take two or three years to build,” Xerox's Kevin Walsh said when we talked about the exchanges right after the election. “The last time I looked at the calendar, that’s not what we’re working with.”

What's more, insurance has, for decades now, tended to be one area where states are the head regulators. Each state has an insurance commissioner, who oversees the marketplaces. They're the ones who insurance companies file rates with and who generally interact with the health insurance plans. All of the sudden, the federal government is going to have to start performing a lot of these unfamiliar tasks. Washington will be in charge of soliciting plans to sell on the state health exchanges.

The big workload is also a sign that, even three years after it became law, the public has yet to embrace the Affordable Care Act. In many of the states where it works - places like Oklahoma, for example - the feds will likely face a hostile environment.

That is the pessimist's take on the federal government's very big workload. But there's also an optimist's take, one that suggests that federal oversight of most Affordable Care Act marketplaces will ultimately strengthen the health overhaul.

Remember, House Democrats originally wanted one national health exchange, where everyone in all 50 states could purchase coverage. That idea was nixed in the Senate bill, which aimed to give states a larger role in setting up the Affordable Care Act.

In a way, all these states turning over their exchanges to the federal government brings Obamacare a little closer to the more liberal House bill, which had the federal government running one big marketplace. It allows the White House to have more control over setting up its signature legislative accomplishment. It also creates some economies of scale, as HHS can develop one template exchange that all 26 states it handles will use.

That could be especially important in states where opposition to the Affordable Care Act still runs very deep. When I've talked to Democratic state legislators, in states where a Republican governor has declined to build an exchange, they sometimes express a sense of relief. If they put an Obamacare opponent at the helm of a crucial health law program, it would be akin to foxes running the hen house. What better way to sabotage health reform, after all, than doing a shoddy job setting up the main vehicle for Americans to access health insurance?

We don't know yet who is right, whether a larger federal role in the exchanges will prove a help or a hindrance in setting up the Affordable Care Act. What we do know, as of last Friday, is that the federal government will run most of the state health exchanges—and has a lot of work to get through by 2014.

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