States Will Be Given Extra Time to Set Up Health Insurance Exchanges

Published: January 14, 2013 - New York Times

WASHINGTON — The White House says it will give states more time to comply with the new health care law after finding that many states lag in setting up markets where millions of Americans are expected to buy subsidized private health insurance.

Under the law, the secretary of health and human services was supposed to determine “on or before Jan. 1, 2013,” whether states were prepared to operate the online markets, known as insurance exchanges.

But the secretary, Kathleen Sebelius, working with the White House, said she would waive or extend the deadline for any states that expressed interest in creating their own exchanges or regulating insurance sold through a federal exchange.

A political benefit of this strategy is that it allows the administration to keep working with even the most recalcitrant states. Administration officials said they were trying to persuade such states to share the work of running an exchange, supervising health plans and assisting consumers.

The exchanges are a crucial element of President Obama’s health care law. Every state is supposed to have one by October, and most Americans will be required to have coverage, starting in January 2014. The federal government will run the exchange in any state that is unwilling or unable to do so. It now appears that federal officials will have the primary responsibility for running exchanges in at least half the states — far more than expected when the law was passed in 2010.

Ms. Sebelius has given “conditional approval” to 17 states that want to run their own insurance exchanges. The 17 include Utah, where officials have said they are reluctant to perform some functions of an exchange.

In its application, Utah said it did not want to enforce the federal requirement for people to carry insurance and was reluctant to determine whether consumers might be eligible for federal income tax credits to help defray the cost of insurance.

“Those are clearly federal responsibilities,” said Norman K. Thurston, the health reform coordinator for Gov. Gary R. Herbert of Utah, a Republican. “We are not enthusiastic about enforcing federal tax policy.”

Federal officials granted conditional approval to some states even though state legislators had not provided clear legal authority or money to run an exchange.

Gov. C. L. Otter of Idaho, a Republican, received conditional approval from the Obama administration this month. But getting approval from the Idaho Legislature, where Republicans control both houses with large majorities, will be more of a challenge, state officials said.

Rather than judging their readiness at this time, Obama administration officials said they would work with the 17 states, setting timelines and milestones for progress toward creation of an exchange.

“There is no deadline,” said Gary M. Cohen, director of the federal Center for Consumer Information and Insurance Oversight. “We are going to give final approval once states demonstrate that they are able to satisfy all the requirements and meet all the conditions of operating an exchange.”

Federal officials are also allowing extra time to other states that might cooperate with the White House to some degree. Ms. Sebelius told states they had until Feb. 15 to file applications to operate exchanges “in partnership with the federal government.”

At a meeting here last week, Ms. Sebelius encouraged Gov. Rick Scott of Florida, an outspoken Republican critic of the federal law, to work in partnership with the federal government in running an exchange for his state, where 3.8 million people are uninsured.

Cindy Gillespie, leader of the health policy team at the law firm McKenna Long & Aldridge, said the Obama administration was trying to accommodate states within the limits of the law.

“It’s smart,” said Ms. Gillespie, who worked for Mitt Romney when he was governor of Massachusetts. “This is a respectful strategy. It shows deference to the states.”

Jay Angoff, a former administration official who served as a senior adviser to Ms. Sebelius, said: “There is no such thing as ‘conditional approval’ in the statute, nor is there a ‘partnership exchange’ in the statute. The federal government has the ultimate responsibility for making sure that an exchange is established in every state. So if a state that receives conditional approval is unable to do all the things it needs to do to establish an exchange by Oct. 1 — which is likely — then the federal government will run the exchange in that state.”

In all the states that received conditional approval, Mr. Cohen said, “there is more work to be done to be ready for open enrollment in October.”

Utah has had an exchange for small businesses for several years. To comply with federal law, Mr. Cohen said, the Utah exchange needs to offer coverage to individuals and help them enroll in health plans with advice from counselors, known as navigators.

It is unclear whether the State Legislature will approve the next steps. “I am opposed to using one dime of Utah state taxpayers’ dollars to comply with federal requirements for the exchange,” said Rebecca D. Lockhart, a Republican who is speaker of the Utah House of Representatives.

Federal officials said they were laying the groundwork for exchanges in Oklahoma and other states that refused to set up their own. But Oklahoma officials said they had not observed much activity. “We have not seen evidence of any steps to set up a federal exchange in Oklahoma,” said Kelly Collins, a spokeswoman for the State Insurance Department.

Julie J. Cox-Kain, the chief operating officer of the Oklahoma Health Department, said: “I assume the federal government is working quickly to build an exchange here and in other states. But the only evidence we’ve seen is a couple of telephone calls seeking information about state insurance regulations.”