Correction: An earlier version of this article incorrectly referred to former Minnesota governor Tim Pawlenty (R) as having been term-limited. There is no limit to the number of terms a governor can serve in Minnesota. This version has been corrected.

State Rep. Steve Gottwalt, a three-term Republican with 10 years’ experience in the health-care industry, is no fan of the health-care law — or its requirement that states set up insurance exchanges.

But as chairman of the Health and Human Services Reform Committee, he decided he needed to weigh in. Unfortunately, from his standpoint, all the choices are bad.

He is not alone. Although health-care reform may have cost the Democrats control of the House in the midterm elections last year, it is the Republicans in statehouses around the country who are feeling the heat in 2011, and insurance exchanges are at the heart of the controversy. It is up to state legislatures across the country to implement the health-care act. And the split between traditional Republicans and the more conservative tea party movement is making the issue even more heated in places like Minnesota.

Insurance exchanges, enabling individuals and small businesses to shop for medical coverage in much the same way that travelers troll the Web looking for bargain airfares, are a cornerstone of last year’s federal health-care law.

Republicans, however, regard it as a likely first step down the road to a government-controlled insurance system.

The law describes in some detail how the exchanges are to be set up, but leaves states considerable leeway in how to structure them. States must have their plans ready by 2013 so the exchanges can begin operation on Jan. 1, 2014. If states do not have their own plans, the federal government will set one up for them.

Gottwalt, who used to negotiate health coverage contracts for provider networks, felt responsible to deal with exchanges. He could have taken the approach recommended by tea party conservatives: repudiate the law, refuse to implement an insurance exchange, hope the Supreme Court rules it unconstitutional or that the Democrats lose the White House and the Senate next year so the Republicans can repeal the law. This strategy is relatively easy to promote in states where legislatures and statehouses are both in Republican hands.

But Minnesota is a divided state. Conservatives played a prominent role in toppling the Democrats’ majority in the legislature last year, but Democrat Mark Dayton, who supports President Obama, won the governorship, succeeding Gov. Tim Pawlenty, now a Republican presidential candidate. Paw­lenty opposed the health-care law. Dayton has embraced it.

If the Supreme Court leaves the health law in place, Dayton might offer his own insurance exchange proposal, or, failing that, Minnesota would get the one-size-fits-all federal template.

Gottwalt finds this last possibility particularly abhorrent, so he chose a third option. He wrote a Republican exchange bill that tries to temper the government’s role. He said he hoped the bill would be taken seriously by Dayton and not used as “the beginning of Obamacare.” Minnesota “should implement an exchange and define it for ourselves,” he said. “I could not absolve myself if I did nothing.”

He filed the bill in mid-February. And it has sat in limbo ever since. The bill has few co-sponsors, and some of those who signed on at the beginning have abandoned it.

“We would just be setting them [the Obama administration] up with the vehicle that will put Obamacare in place in 2014,” first-term Republican Kathy Loh­mer said of Gottwalt’s bill. “A significant number of Republicans will not support it.”

With the current legislative session scheduled to end May 23, the legislature’s Republican leadership is beset from all sides. Commerce Commissioner Michael J. Rothman, the lead negotiator for Dayton, said a health insurance exchange is “a top priority” of the administration, which is trying to determine whether lawmakers have “the political will” to produce a bill. So far they do not.

Business groups want an exchange to avoid the federally imposed plan. The legislative leadership is sympathetic to this view, but worries that conservatives will gin up so much grass-roots opposition that the GOP will lose its majorities next year.

“The showdown is that Republican opponents of the law can only block [the exchange], which is their second-least-favorite outcome,” said Yale political scientist Jacob Hacker, a health-care expert who supports changes to the system. “But in doing so, they risk government intervention, which is their least favorite.”

Although Dayton has not proposed his own Minnesota plan, Rep. Erin Murphy, of the Democratic-Farmer-Labor Party, as the Democrats here are known, has filed what she calls a “robust” exchange bill. It sets up a state agency to administer the exchange with a governor-appointed board of directors. In addition to private insurers, the exchange “shall offer at least one public plan” sponsored by the state, the bill says.

Gottwalt’s plan envisions a nonprofit, government-affiliated “corporation” within the framework of the health-care law. The board of directors would elect its own members and would operate independently, although the state commerce commissioner would regulate the exchange. The plan makes no mention of a public option.

Pressure is mounting to do something because both parties regard Minnesota as a leader in health-care innovation. Only six states have enacted health insurance exchanges, and two of these — Massachusetts and Utah — predated passage of the health-care law.

Kaiser Health News is an editorially independent news service of the Kaiser Family Foundation, a nonpartisan health-care policy organization that is not affiliated with Kaiser Permanente.