- The Washington Times - Tuesday, November 29, 2011

Love it or hate it, states across the country are facing a looming dilemma over whether to get to work implementing a key component of President Obama’s massive health care overhaul.

With deadlines approaching to set up mandatory state-level “exchanges” to offer affordable health insurance, some states are scurrying to get started, others are refusing to play by the rules and still others are falling somewhere in between.

Some states, banking on the Supreme Court or the next Congress and president to tear down key parts of the health care law, see no point in even putting in the preparatory spadework.

“Where there’s an escape valve, there’s really no first-mover advantage for states to jump into this, especially when we don’t know what’s going to happen next summer and in the election,” said Tony Keck, director of South Carolina’s Department of Health and Human Services.

Underscoring the confusion, the Obama administration announced Tuesday that 13 more states have been awarded some $220 million in grant money to help set up the insurance exchanges by 2014. Seven of those states are suing the administration over the constitutionality of the law.

Health and Human Services Secretary Kathleen Sebelius told reporters it was natural that states were moving at different speeds in embracing the new requirements.

“States are moving at their own pace to get their exchanges up and running,” she said. “This is a natural result of a process that gives states maximum flexibility.”

From California, where legislators approved an exchange just months after the Affordable Care Act was enacted in 2010, to South Carolina, where attempts have been shot down by the legislature, states face decisions. Will they set up their own exchanges? And if so, what will the exchanges — the centralized “marketplaces” where individuals and small businesses can browse through insurance products — look like? Or will states simply opt for letting the federal government run an exchange for them, as the Obama law provides for?

For the 28 states suing the federal government over constitutionality of the health care law, it’s tempting to bank on it being overturned by the Supreme Court or even by Congress, depending on how next year’s elections turn out. Still, those outcomes are by no means certain.

But even states looking to comply with the law are taking different tacks on the exchanges, which aim to expand access to health coverage by simplifying options for consumers and offering more government subsidies while still offering states broad latitude in how to set them up.

While they have until 2014 to have them up and running, the states must demonstrate ample progress by Jan. 1, 2013. If they’re not ready in time, the federal government will step in, but states still can apply to reassume control.

Sixteen states have enacted legislation that moves them closer to setting up an exchange, while another dozen or so aren’t taking much action at all. The rest are proceeding more slowly, waiting on advice from advisory committees or working on legislation for next year. States involved in the lawsuits can be found in each of the categories.

“You have the vast majority of states that are somewhere in the middle,” said Cheryl Smith, a director for Leavitt Partners, a Salt Lake City-based firm that advises states on insurance exchanges. “Whether they like it or not, they understand it’s the law. Even if they’re speaking out against the exchanges, they are still doing work.”

An example of that tactic is Colorado, which has joined Florida and 24 other states to challenge the individual mandate requiring Americans to obtain health insurance in a case that will be heard by the Supreme Court next year.

At the same time, the state is moving quickly to set up an exchange, deciding to run it as a quasi-governmental agency that operates as a nonprofit but whose board members are appointed by the governor. The state was on track to set up an exchange even before the Affordable Care Act became law, so state lawmakers were in widespread agreement, said Lorez Meinhold, who is overseeing the creation of the exchange.

“There was really the sense that we should play off the innovation rather than rely on a federal solution for us,” she said. “In addition, we had done a blue-ribbon commission on health care, so we had been talking about exchanges.”

For other states, setting up an exchange amounts to undermining their own cause through acquiescence to a binding, national law.

While nearly every state accepted a $1 million federal grant to explore setting up exchanges, South Carolina ended up returning most of its grant as an exploratory committee neared its final conclusion that the state shouldn’t participate in the exchange — a recommendation strongly supported by Gov. Nikki R. Haley, a Republican.

In a state dominated by Republicans, opposition runs high to the law’s expansion of federal subsidies, which raises Medicaid eligibility to 133 percent of the federal poverty level and offers Americans earning up to 400 percent of the federal poverty level partial subsidies for private insurance.

Instead, officials hope they can persuade the federal government to become more flexible in what it considers a satisfactory outcome by allowing the state to satisfy requirements with private exchanges that already operate in South Carolina. Mr. Keck said the state intends to foster an environment where these exchanges can expand and will continue to negotiate with the federal government.

“The feds will realize they can’t make this work and we should continue to push back at them and say, ‘We can make this work, this is how we’re going to do this,’ ” he said. “If you say no and continue to engage them, then you’re in negotiation with them.”

The federal government also has awarded larger grants to help states implement the exchanges and run them for the first few years. More than half of the states have accepted them — 10 of which are challenging the health care law — but they were returned by Kansas Gov. Sam Brownback and Oklahoma Gov. Mary Fallin.

A panel of Oklahoma lawmakers is deciding what to do about the exchanges. Leaders are offering mixed predictions of what course the state will choose.

State Sen. Gary Stanislaski expressed openness to an exchange for small businesses — also mandated under the law — but said there is no reason for the state to invest money in an exchange for individuals.

“Initially, it may not be in total compliance with the Affordable Care Act, but it’s in total compliance with the needs of the citizens in our state,” he said. “We’re banking on potentially two major events: the Supreme Court and No. 2, there’s an election and if we have a new president and majority of Republicans.”

But state Sen. Bill Brown said the law is the law.

“As much as we might dislike the thought of the national health care plan, it is still the law and we feel very strongly that we have a mandate of Jan. 1 of 2013 that we have to have a structure of an exchange in place and so we’re going to work to get that done,” he said.

In the end, the situation could be a bit ironic. Oklahoma and other states that are resisting implementing the health care law because they think it’s an overreach of government are risking more government control within their own borders, said Ms. Smith of Utah.

“Essentially what they’re saying is ‘We’re willing to take that chance. … We have decided that we are going to take the chance of allowing HHS to have both regulatory and budget control over our state,” she said. “I think that’s a terrible chance to take.”

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