2013 is the year of the insurance exchange, what is your state doing about it?

Guest blogger Joanna S. Suder, JD, is an attorney working as the Pro Bono Coordinator at Delaware's Office of the Child Advocate. She represents dependent, abused and neglected children while also advancing statewide policy change.

Health insurance exchanges, a keystone of the Affordable Care Act (ACA), create markets through which small businesses and individuals can purchase insurance coverage. The December 14, 2012 deadline for states to decide on whether they will form their own exchanges or default to a federally run version has come and gone. The exchanges will officially begin enrollment in October 2013 for coverage that will begin in January 2014. While many states have been reluctant to commit to their own exchanges, others have been developing plans since the ACA was passed in March 2010.

Exchanges can operate in one of three ways: 1) states can run their own, 2) they can default to a federally facilitated exchange, or 3) they can operate an exchange in partnership with the federal government. Eighteen states and the District of Columbia plan to operate state-run exchanges, bearing the full burden of their development and operation. The majority of states, 25 of them, have defaulted to the federally facilitated exchange. Seven states have said they will operate partnership exchanges.

Among states in the Mid-Atlantic region, Maryland has committed to maintaining a state-based exchange. In April 2011, Democratic Governor Martin O’Malley signed a law establishing the Maryland Health Connection. While the state has made great strides, even gaining conditional approval of its exchange from the U.S. Department of Health and Human Services (HHS), it has not done so in a vacuum. It has received extensive assistance from the Robert Wood Johnson Foundation (RWJF) and was the recipient of over $157 million in grants from the federal government.

On December 7, 2012 New Jersey Governor Chris Christie vetoed a bill that would have established a state-based exchange in New Jersey, and he released a letter to HHS announcing that the state would be defaulting into the federal exchange system. While few were surprised at Governor Christie’s reaction given his political leaning, New Jersey had actually been working toward a state-based exchange for over a year. However, after receiving almost $9 million in federal grants, Governor Christie determined that he was unwilling to commit to a state-based exchange, saying he did not know the ultimate costs involved or the level of control the state would be able to exercise.

On December 12, 2012, just two days before the deadline, Pennsylvania Governor Tom Corbett decided that the state would default to a federally facilitated exchange. The state had received almost $35 million in federal exchange planning and establishment grants. However, state lawmakers and policy analysts were unable to agree on an approach. In his press release, Governor Corbett said that he, like Governor Christie, felt more guidance from the federal government was needed before he could commit to the effort.

To the south, 2012 was a year of action for Delaware. In July, Governor Jack Markell determined that the state would plan for a partnership exchange. Delaware would oversee plan management and consumer assistance while the federal government would handle the management functioning. In November, the Governor sent an intention letter to HHS Secretary Kathleen Sebelius, making Delaware only the second state to express interest in a partnership exchange.

Operating a state-based exchange involves some risks. Federal regulations and guidance that have been released so far are not final, and uncertainties in many regards remain. However, it is just as big a risk for states to allow the federal government to operate a one-size-fits-all health insurance exchange. The states that have defaulted to that approach include many with a political environment that values states’ rights and scorns expansive bureaucracy. Yet through this inaction, those states are indirectly enabling such a bureaucracy.

Democratic governors O’Malley and Markell have undertaken innovative and personalized state exchanges, unsurprising after their years of support for President Obama. In contrast, Pennsylvania and New Jersey, both run by Republican Governors who have been vocal in their opposition to the ACA, have opted to default to the federal exchange system rather than commit time and money to a highly divisive program.

With time, more states may feel comfortable enough to tackle the responsibility of exchanges. This will offer their citizens a more personalized approach to health coverage.

-          By Joanna S. Suder, J.D.