Health Exchanges to Be Run by 18 States as Most Governors Pass

Governors in 18 of the 50 U.S. states agreed to build health-insurance exchanges, a final tally that leaves the federal government with the duty of running marketplaces for the majority of the nation through 2014.

Idaho, Nevada and Utah were among the states that submitted blueprint applications to the Obama administration by the Dec. 14 deadline to create exchanges for residents to shop for insurance as part of the Affordable Care Act, the Department of Health and Human Services said today. Governors who opted out said they balked at the federal regulations they would have to adhere to and long-term costs they would have to bear.

Politics, not practical concerns, is the reason why states led by Republican governors’ rejected a program crafted by a Democratic president, said Robert Blendon, a health policy professor at the Harvard School of Public Health in Boston. The law still lets a governor take over the federal exchange for their state any year after 2014, allowing them “to watch this without taking a great political risk,” he said.

“If these things are working and people who favored them do well in the 2014 election, I think these governors will just discover it’s worth having,” Blendon said in an interview.

The state exchanges sit at the heart of the law’s mandate to expand medical coverage to as many as 30 million people. The number of states opting out gives the Obama administration an opportunity to ensure some consistency nationally in how the exchanges are structured, said Dan Mendelson, chief executive officer of Washington-based consultant Avalere Health.

“From that perspective, they see that as a positive,” he said in a telephone interview.

State Partners

The 18 states participating are: California, Colorado, Connecticut, Hawaii, Idaho, Kentucky, Maryland, Massachusetts, Minnesota, Mississippi, Nevada, New Mexico, New York, Oregon, Rhode Island, Vermont, Utah, and Washington state, according to a blog post by the health agency. Washington, D.C., is also building an exchange.

Four states -- Delaware, Illinois, Iowa and North Carolina -- plan to contribute some services to a federally built exchange in a partnership with the Obama administration, Gary Cohen, who directs the U.S. Center for Consumer Information and Insurance Oversight, said last week. Those states may take on functions such as plan selection and customer assistance, while the federal government builds the websites and other infrastructure.

Avalere projects that the number of states in partnership with the government may eventually reach 12.

Federal Funding

Under the law, the exchanges are designed to allow consumers who don’t have medical coverage through their jobs beginning in 2014 to easily compare health plans, and then buy coverage online and through telephone services. The U.S. is subsidizing the cost for those who can’t afford coverage.

Funding for states to build their own exchanges is essentially unlimited, and the U.S. has given $1.8 billion so far, including to some states that have said they won’t complete the work, Cohen said in prepared remarks for a Dec. 9 congressional hearing.

States still have to come up with their own money to run the marketplaces. Nebraska Governor Dave Heineman, a Republican, said it would cost about $81 million a year to run an exchange while the federal government could do the same job for about 27 percent of that amount. Connecticut anticipates a cost of about $30 million a year, said Kevin Counihan, the CEO of the Connecticut Health Insurance Exchange.

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

“The majority of states will play an active role operating their exchanges,” Kathleen Sebelius, the U.S. health secretary, said in a blog post. Photographer: Mark Wilson/Getty Images