Most states forming health insurance exchanges

However, Arkansas is the latest to decide against creating an insurance marketplace, so residents will enroll through a national exchange.

By Doug Trapp — Posted Dec. 8, 2011

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Although a majority of states are creating their own health insurance exchanges, a few other states explicitly have declined to create their own exchanges and instead will rely on a national exchange to be administered by federal health officials.

The Dept. of Health and Human Services announced Nov. 29 that 29 states have made significant progress toward creating health insurance exchanges under the national health system reform law. HHS on Nov. 29 awarded nearly $220 million in grants to 13 states to help them create exchanges. All but one of the grants were level-one, single-year funding for states that already made progress on creating an exchange with the help of earlier planning grants. The other is the first level-two grant, a multiyear award that will help Rhode Island progress further in the exchange implementation process.

"We are committed to giving states the flexibility to implement the Affordable Care Act in the way that works for them," said HHS Secretary Kathleen Sebelius.

The exchanges will serve a key role in the health reform law's expansion of coverage to an additional 30 million people, split about equally between private health plans and Medicaid. These tasks include selecting private health plans to be offered in the exchanges and guiding consumers seeking to enroll in coverage.

Sebelius said 49 states and the District of Columbia have received at least a basic health exchange planning grant. Thirteen states have adopted legislation to create an exchange.

Some states are taking leading roles in exchange implementation. The Minnesota Dept. of Commerce on Dec. 5 began seeking consumer input on online exchange interfaces designed by five vendors seeking a contract for the work. The department posted the models on its site and will collect feedback on them until Dec. 21. Consumer input will be used to choose the winning bid, said Minnesota Commerce Commissioner Mike Rothman.

However, other states are content to allow federal health officials to take over the work of creating an exchange. Kansas and Oklahoma returned their planning grants because lawmakers were concerned that the grants would commit the states to an undetermined amount of future health spending. Alaska did not apply for a planning grant, and leaders in other states, such as Texas Gov. Rick Perry, have said they will block implementation of a local exchange. Many of these states are suing the federal government to block implementation of the health reform law as a whole.

On Dec. 2, Arkansas became the latest state to opt out of creating its own exchange. Arkansas Insurance Commissioner Jay Bradford said opposition by state lawmakers forced a state exchange steering committee to recommend that Arkansas abandon its implementation efforts.

"The steering committee and I believe insurance is local and local regulation is preferable," Bradford said. But the Arkansas Legislature did not give the department the authority to create an exchange.

Bradford said allowing the federal government to operate an exchange in Arkansas will cost the state. The state could lose tens of millions of dollars in premium taxes it would have received from operating its own exchange. The federal government also would have paid for costs associated with integrating the state's Medicaid program into a local exchange.

The health reform law requires states to show significant progress in creating their own exchanges by January 2013. If federal health officials judge that a state will not be ready to operate an exchange by January 2014, the federal government will operate a national exchange to serve these residents.

However, states can opt to create their own exchanges after 2014 and take over from the federal government. Sebelius clarified on Nov. 29 that states can continue to use exchange planning grants after 2014 and that state insurance regulations will remain in effect even if the federal government operates an exchange in that state.

Meanwhile, the Centers for Medicare & Medicaid Services on Dec. 1 awarded a contract to CGI Federal to help develop the national health exchange. The contract is worth an estimated $93.7 million over two years for the global firm headquartered in Montreal.

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