Republican state officials stall on setting up health insurance marketplaces

May 12, 2012

In about two dozen states across the country, the insurance marketplaces at the heart of the 2010 health-care law remain in limbo, with Republican governors or lawmakers who oppose the statute refusing to act until the Supreme Court decides its constitutionality.

New Jersey’s Republican governor, Chris Christie, joined the ranks Thursday, vetoing a bill from the majority Democratic legislature that would have set up the Garden State’s version of the “exchanges,” through which individuals and small businesses could shop for insurance.

In states with Democratic governors, such as New Hampshire and Minnesota, it is often Republican-dominated legislatures that are causing the hold-up. And in six states where Republicans hold both branches of government, including Kansas and South Dakota, state assemblies haven’t even considered laws to establish the marketplaces.

Though the battles primarily break along partisan lines, there have been at least a half-dozen exceptions. Last spring, the Republican governor of Nevada chose not to stand in the way of an exchange bill adopted by the majority Democratic assembly. And the Republican insurance commissioner of Mississippi is using existing authority to set up an exchange with the blessing of the Republican governor.

Meanwhile, Democratic lawmakers in a few states — including Arkansas — have proved unwilling to push for an exchange.

And in some states the delay has been caused by disagreements over technical details rather than principle.

The gridlock could continue for months even if the Supreme Court upholds the law, predicts Cheryl Smith, a consultant with the conservative firm Leavitt Partners, which is working with a number of states on their plans.

The court is expected to rule late next month. But even if the law survives that challenge, many officials opposing it will still want to wait on the outcome of the November elections — banking on a sweep of both the presidency and Congress to empower Republicans to repeal or revise the law.

Until then, said Smith, state GOP leaders will be loathe to take steps that could be construed as legitimizing a statute they argue is fundamentally unsound.

“This does not end in June,” Smith said.

The approach could leave state officials little time to adapt if neither the court decision nor the elections go their way: Although the exchanges won’t open for business until 2014, the law requires a state to prove it has made sufficient progress toward setting one up by Jan. 1, 2013 or face a federal takeover.

Political statement

The exchanges are essential to achieving the law’s goal of expanding access to insurance because they are aimed at small businesses and people unable to get coverage through an employer. The law will also provide millions of such individuals federal subsidies to buy a plan through an exchange.

Nonetheless, state lawmakers and analysts on both sides of the debate say the foot-dragging amounts to more of a political statement than a strategy with potential to derail implementation of the health-care law.

This is partly because a number of Republican governors — including Christie, along with the governors of New Mexico, Nebraska, Virginia, Tennessee and Arizona — have signaled that, if the law were to survive, they would prefer not to cede responsibility for the exchange to federal authorities.

Kevin Roberts, a spokesman for Christie, said the governor had already laid enough technical groundwork to move quickly should the court uphold the law. “Since the beginning we’ve taken steps to maintain control at the state level,” he said. “We don’t expect to have any difficulties.”

One option would be for the state assembly to adopt a new exchange bill during its fall session, Roberts noted. Christie might also be able to set up an exchange by executive order.

That approach is also being considered by a handful of the Democratic governors who have been stymied by GOP-led legislatures. New York Gov. Andrew Cuomo took the step last month, after Republicans in the state senate thwarted an exchange bill. And earlier this month in Kentucky — where neither the Republican-controlled Senate nor the Democratic-controlled House have introduced such legislation — Gov. Steve Beshear announced he would use an executive order if the court upholds the law.

To be sure, Republican governors in at least a dozen states have not even shown interest in such behind-the-scenes preparations, suggesting some kind of federal intervention would be necessary.

Last year, Kansas Gov. Sam Brownback (R) sent back a $31.5 million federal grant to help the state develop a system for determining who could be eligible to buy on an exchange. Now Kansas Insurance Commissioner Sandy Praeger says she is all but certain her state will not be ready in time.

Praeger, a rare Republican elected official who supports the law, said her commission had done enough preparatory work to be capable of handling other tasks involved in running an exchange, such as determining which plans can be sold on it.

But at best, she could envision Kansas running its exchange in some kind of partnership arrangement with the Obama administration, which has been in discussions with states about developing such models over the past several months.

That would be an “unfortunate” development, said Praeger. And she said it could result in a somewhat different experience for Kansas consumers. For example, Kansas officials prefer a set-up in which all qualified insurance plans would be free to sell on the exchange, instead of one in which authorities choose those they deem best. Federal authorities might disagree.

Still Praeger isn’t convinced it would come to that.

“Every indication from [the Obama administration] is that they want to work with states and provide as much flexibility as possible,” she said. “I think we’ll really have a lot of flexibility.”

Long-term concerns

Smith, who has strong objections to the law, agreed that federally run exchanges might not seem substantially different to consumers at first. But she is worried that over the long term, they would open the door to further encroachment by the federal government on regulatory functions currently carried out by states.

She also questioned how much discretion federal authorities would be able to grant states if the administration were responsible for operating a large number of exchanges.

“If you have three kids, you can make three different dinners,” she said. “When you have 12 kids, everybody is getting spaghetti, like it or not.”

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