Short Takes On News & Events

Facing Deadline, Most States Say No To Running Their Own Insurance Exchanges

By Phil Galewitz

December 14th, 2012, 9:51 AM

Updated at 5:35 p.m.

The Obama administration will have to build and operate online health insurance markets for more than 30 states, something few expected when the federal health law was approved in 2010.

With today’s deadline hours away, only 18 states and the District of Columbia had proposed running their own insurance markets, also known as exchanges, a key vehicle under the law to expand health coverage to an estimated 23 million people over next four years.

“Most analysts did not anticipate that the federal government would end up playing such a big role in the operation of exchanges nationwide,” said Carolyn Pearson, a director at the Washington, D.C., consulting firm Avalere Health.

When President Barack Obama signed the Affordable Care Act, the option to have the federal government run the state markets was seen as a backstop. Administration officials have repeatedly said they hoped most states would run the markets themselves because they know their insurance markets best.

Most experts thought only states with small populations such as Delaware or Montana would seek federal help. Instead, most will rely on the federal government — including two of the most populous states, Texas and Florida, which together account for nearly 20 percent of nation’s uninsured. By law, the state exchanges must be approved by the federal government by Jan. 1, begin enrollment next October and have coverage take effect Jan. 1, 2014.

Administration officials say Americans can be assured the markets will be available in every state next year for people to compare and buy coverage. This week, eight states — Colorado, Connecticut, Kentucky, Maryland, Massachusetts, New York, Oregon, Washington and the District of Columbia — were given “conditional” approval for their exchanges.

For consumers, the new exchanges will operate similarly to online travel Internet sites Expedia and Orbitz in helping people compare benefits and prices. But the exchanges will also have broad powers to determine which plans are available and the types of benefits offered. They will also determine who is eligible for federal subsidies as well as Medicaid, the state-federal health insurance program for the poor.

Most Republican-led states have opted against running an exchange, although Idaho and Nevada this week said they would seek approval. Most did little work to prepare to build exchanges over the past two years as they first sought to overturn the health law in the courts and then delayed implementation activities hoping President Obama would lose re-election. Neither occurred.

In a development Friday afternoon, Utah Gov. Gary Herbert asked Health and Human Services Secretary Kathleen Sebelius to certify that state’s exchange, which was built before passage of the health care law and is geared to small business. “Generally, I would prefer a state-based approach if I were to have the flexibility to stay true to Utah principles,” Herbert wrote. “Consequently, I intend to move forward with Utah’s version of an exchange and am requesting that you certify Utah’s version of an exchange as ACA-complaint.”

Herbert acknowledged that Utah’s exchange was “atypical,” but suggested it serve as “the minimum standard for all federally compliant exchanges.”

States that don’t run their own exchange have two options: a federal exchange that needs little state participation or a federal partnership exchange, in which states help by performing certain duties such as providing customer service. States have until Feb. 15 to say whether they intend to seek a federal partnership exchange. Four  — Delaware, Illinois, Iowa and North Carolina — have done so already, Gary Cohen, director of the Center for Consumer Information and Insurance Oversight at the Department of Health and Human Services told lawmakers Thursday.

On Friday, Iowa Gov. Terry Branstad said his state would also seek a partnership model. “The state of Iowa intends to minimize the federal government’s intrusion into the regulation of insurance,” Branstad wrote to HHS Secretary Kathleen Sebelius. “We will continue to regulate insurance plans in Iowa and retain control over our Medicaid and Children’s Health Insurance Plan eligibility.”

With the pressure mounting on federal regulators to operate or assist in operating exchanges in most of the country, “I don’t envy them for the job that they have,” Dennis Smith, the top health official in Wisconsin told a congressional committee Thursday. Wisconsin won’t pursue a state exchange.

But Ceci Connolly, managing director at consulting firm PricewaterhouseCoopers, said the work for the administration is the same whether one state or 50 states opt for a federal exchange.  The challenge will be in coordinating that federal exchange with various state Medicaid programs and creating a seamless experience for consumers, who are likely to move back and forth between Medicaid and private insurance, she said

“It is going to be a sprint for government officials and the industry to be ready by next fall,” Connolly said.

States planning for state exchanges, according to Avalere:

  • California
  • Colorado
  • Connecticut
  • District of Columbia
  • Hawaii
  • Idaho
  • Kentucky
  • Maryland
  • Massachusetts
  • Minnesota
  • Mississippi
  • Nevada
  • New Mexico
  • New York
  • Oregon
  • Rhode Island
  • Utah
  • Vermont
  • Washington

28 Responses to “Facing Deadline, Most States Say No To Running Their Own Insurance Exchanges”

  1. Darrin says:

    So much for the small government conservatives. The truth is they want to impose there understanding of things in small pockets to be the “Big man on campus” and are at heart lazy.

  2. Kenneth Irvin says:

    I think this is great news for U.S. citizens living in Texas. The government of the State of Texas is not consumer friendly in the least. The government of the State of Texas is business friendly, and any state-run health care program would be in federal court constantly trying to defend the constitutional basis of it’s own state-run program.

  3. Jose says:

    It is interesting that the two states where marijuana was legalized are among the states setting up their own exchanges.

  4. We’ve just voluntarily given up any choices about our own health over a lifetime. The U.S. has become even more Soviet than the Soviet Union ever dreamed of, without even a fight. Even those in healthcare will be subject to the same rules throughout their lives. This will not end well for anyone.

  5. Helen says:

    Finally, this is what Americans have always wanted: “Single-Payer” Health Insurance
    for each and every American. This is WONDERFUL!!!! WONDERFUL!!!! WONDERFUL!!!!
    THANK YOU, GOD!!!!

  6. John says:

    It is best for the federal government to setup the exchanges and the states can take over once they are working smoothly. No need for the states to go through the headaches of initial implementation.

  7. LanceSmith says:

    I’m fine with the government setting regulations and requiring that everyone get health insurance, but it shouldn’t be setting up ANY exchanges (national or state). Companies like Expedia exist for travel for a reason: their customers – and the associated market – demand it. The government should be there to set the rules – which in this case will increase customer demand – and companies should rise up to take advantage of those rules.

    Case and point: everyone dreads the DMV and often the post office because these entities are low on customer service because they can be… you really want the healthcare equivalent of the DMV and the post office taking care of things??

  8. John Thomas says:

    IT jobs are about to go through the roof for Senior Systems Engineer’s and Network Engineers. If you have a CCNA, RHCE, MCSE, VCP-DV is going to be rockstar hot.

    It’s a great time to be in IT (virtualization) or a Healthcare Administrator. Make sure you pick a CAMHE accreditated school if you are going to do anything with Healthcare IT!

  9. Mike says:

    So, the bottom line to all of this is that it will be more expensive than originally promised….hope I don’t fall out of my chair in surprise…

  10. BTH_AZ says:

    Like Mr Irvin in Texas, I am glad that Arizona is not providing its own exchange. After a long study period, Arizona decided against implementing their own exchange. My suspicion is that the federal program has stringent minimum requirements that the state could not avoid. I am extremely grateful that my family will not be under any health program implemented by the Arizona Legislature and Governor Brewer.

  11. Tranton says:

    Isn’t this just typical for the Republicans, they go on and on about Big Government control and then when it comes down to it (like Texas) are all to glad to let the Government do the work for them. They are so use to complaining about things and offer no alternatives.

  12. JD says:

    This graphic says that it was updated on Dec 12, but Gov Haslam of TN announced on Dec 10 that he would not be running a state exchange and was opting for the federal option.

  13. CharlesKayeMBA says:

    Don’t you all remember Pelosi saying “we have to pass the law to know what’s in it”?

    Well this is just the beginning of the largest cluster f**k of a gov run program that we have ever seen. when are people going to get it into their thick skulls that whenever the gov gets its hands on an industry or tries to regulate it, cost goes UP, choices and quality go DOWN.

    The gov just doesn’t give a cr*p about being efficient. They have no motivation to run a lean organization because if they run out of funds, they just tax us more.

  14. Chris Whaley says:

    Let’s all be thankful that Obamacare opted to go with universal insurance instead of universal healthcare. Its really important that the insurance companies sit in the middle raking off a profit and driving medical costs up.

  15. Segun says:

    Even though privately run exchanges is a good idea I don’t agree that the government run ones will be poor in rendering good customer service. My experiences with the DMV, Post Office, Social Security and other agencies have often been good. When compared with other countries, Americans do not realize how well and effectively such agencies as mentioned above are run.

  16. Joseph says:

    Most states opted out due to long term cost of running and maintaining the exchange. The federal government will only pay 90% of the additional of expanding the exchange, but then “gradually” lower the amount that they and shift the cost to the states. Having the Goverment pick up the cost is the only option available if the states want to stay financlally solvent.

  17. Johnson says:

    The point is that many states didn’t want the healthcare “reform” so they aren’t going to put forth any effort in organzing the programs for it. Sounds fine to me. The Democrats made their bed and now they have to sleep in it. Also reminds me of Andrew Jackson and his “You made your decision now come enforce it” statement.

  18. anotherview2 says:

    Another failed, extreme political ploy by the immoderate Republican Party foolishly hoping for a reactionary movement to arise with its leadership coming from the party ranks, all duped by the rich and powerful who continually stroke the leadership with blandishments, devise glossy, misleading talking points, and otherwise distort the national political dialog to favor the interests of the rich and powerful, to the detriment of the national interest. This ploy has backfired. Its authors and defenders will of course shape-shift themselves for the next ploy, on the premise the rich and powerful will perpetually exist and exert their special interest, via spreading their dollars to influence the ready mentality of the Republican Party. In our age, the rich and powerful, with the aid of their mouthpiece, the Republican Party, employing the Internet and its communication capacity, will eschew the larger interests of the middle, moderate electorate, attacking and undermining these interests, through clever, concocted propaganda falsely implying to act in these interests. As a tool, this pack of lies will induce political anger, political hostility, and political hatred, and thereby produce political division in our dear nation, with the object of generating confusion of issues instead of impartiality leading to clarity of issues. We have in front of us today a living political evil in the corporation of the lapdog Republican Party serving its masters, the rich and powerful.

  19. Dan Campbell says:

    Just what we all need more cost, dublicity, bureaucracy and red tape to drive us all insane.

  20. nvhorseman says:

    Now we will see if the feds have the guts to put in a single payer option and make sure that there are more NOT FOR PROFIT insurers than for profit insurers that are already required to put 80 per cent of the paid premium toward heath care and no more than 20 percent to administration. Or the government could take it all over, as described below. Any way the gov’t. does it, is better than being screwed by for profit insurers and saves the taxpayer lots of money, whether you think so or not. An added plus, no more insurance ads on TV….Yeah!!

    Access and Benefits

    All Americans would receive comprehensive medical benefits under single payer. Coverage would include all medically necessary services, including rehabilitative, long-term, and home care; mental health care, prescription drugs, and medical supplies; and preventive and public health measures.

    Care would be based on need, not on ability to pay.


    Hospital billing would be virtually eliminated. Instead, hospitals would receive an annual lump-sum payment from the government to cover operating expenses—a “global budget.” A separate budget would cover such expenses as hospital expansion, the purchase of technology, marketing, etc.

    Doctors would have three options for payment: fee-for-service, salaried positions in hospitals, and salaried positions within group practices or HMOs. Fees would be negotiated between a representative of the fee-for-service practitioners (such as the state medical society) and a state payment board. In most cases, government would serve as administrator, not employer.


    The program would be federally financed and administered by a single public insurer at the state or regional level. Premiums, copayments, and deductibles would be eliminated. A single payer system as embodied in national legislation (H.R. 676) could be financed in several ways. One progressive option would be to fund it with a combination of existing federal and state revenues for health care, a payroll tax on employers (4-7 percent, much less that what employers pay today to provide less secure coverage), a 6 percent tax on unearned income, a 6 percent surtax on the highest 5 percent of income-earners, and a small tax on financial transactions.