As states lag in implementing health-care law, bigger federal role looks likely

Across the country, states are lagging in preparations to erect the health insurance market­places at the heart of the 2010 health-care overhaul, bogged down by a combination of partisan hostility and practical hurdles.

Faced with the delay, administration officials have been ramping up talks with state leaders in recent weeks over ways the federal government could pitch in without having to completely take over — speaking both informally and at a series of regional meetings underway.

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The private discussions are evolving, with a range of federal-state partnership arrangements under consideration. But analysts on both sides of the health-care debate say one thing appears increasingly certain: The system of 50 completely state-operated insurance markets envisaged by the law is not what Americans will encounter when these “exchanges” open for business in 2014.

“When this law was passed in the spring of 2010, people really believed the states would get on board and we would see almost all exchanges being state-run,” said Timothy Jost, an expert on health policy at Washington and Lee University who supports the statute. “But there is a growing concern that quite a number of states will not be ready.”

Administration officials offered a more optimistic assessment.

“Many states have made significant progress [in] laying the groundwork,” said Richard Sorian, assistant secretary for public affairs at the Department of Health and Human Services. “States still have time to build on that good progress.”

State-based exchanges are crucial to achieving the law’s goal of vastly expanding access to health insurance. They will be open to an estimated 24 million Americans for whom health plans have been particularly expensive — those who buy coverage on their own or as employees of a small business. The exchanges are intended to control costs by creating a larger pool of customers and allowing them to comparison shop. Many customers will also qualify for federal subsidies.

If a state is unwilling or unable to run an exchange, the federal government can step in. But the prospect of taking over exchanges in multiple states could prove logistically and politically unpalatable for the Obama administration.

With less than a year to meet key deadlines, only about a dozen states have made robust strides toward establishing exchanges. Some others, including a number led by Republican governors, are proceeding at a moderate but still potentially viable pace. Yet about a third remain in the early stages of the process.

Technically, states have until Jan. 1, 2013, to demonstrate enough progress to avoid a federal takeover. But in reality the timeline is tighter. The deadline to apply for the final round of federal funding that a state would likely need to build its exchange is June 29. States can qualify for those funds only if they have already enacted the legal authority to establish their exchange and agreed on its governance structure and budget.

A few may have already missed that window because they have not acted, and their legislatures are not scheduled to meet again in regular session before 2013.