State Health Insurance Exchange Legislation: A Progress Report

 

 

  The Commonwealth Fund Blog

May 30, 2012

By Sara R. Collins and Tracy Garber
The Affordable Care Act requires each state to establish by 2014 a new health insurance marketplace or “exchange” where individuals and small businesses can purchase affordable health insurance plans. The exchanges are the centerpiece of the reform law: they will be the main portals where people without employer-sponsored health insurance will go, either in person or online, to both find a health plan and learn about and apply for any federal subsidies for which they are eligible. The Congressional Budget Office estimates that by 2020, 22 million people will enroll in health plans offered through their state exchange.

In order to establish an exchange, states must give themselves the legal authority to do so. State legislatures can accomplish this by crafting and passing legislation for their governors to sign. In the absence of state legislation, governors in some states may pursue other mechanisms to give them the authority to establish and operate an exchange, such as an executive order. In states that do not opt to run their own exchanges, the federal government will operate a “federally facilitated exchange” in their state. But according to new guidance released by the Department of Health and Human Services last week, within the federally facilitated exchange, states may also choose a “state partnership exchange” in which they would operate exchange functions related to plan management and/or consumer assistance.¹
HHS’s new guidance also gives states until November 16, 2012 to submit an “Exchange Blueprint” that will lay out how they intend to operate their exchanges, or whether they are electing to participate in a state partnership exchange.² HHS will grant approval to states to run their own exchanges by January 2013. HHS may grant conditional approval of an exchange if a state is at an advanced stage in the development of their exchanges but cannot demonstrate complete readiness by January 2013. In addition, states that do not have exchanges ready for operation in 2014 may apply to operate the exchange in 2015 or in subsequent years.

Status of State Health Insurance Exchange Legislation

This state map provides a picture as of May 2012 of where states stand in establishing the legal authority for their insurance exchanges.³ 

Legislation signed into law. In 2011, governors of 11 states and the District of Columbia signed legislation to establish insurance exchanges in their states. These are the dark blue states on the map: California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, Washington, and West Virginia. Prior to the passage of the Affordable Care Act, Massachusetts, in pink on the map, passed a law very similar to the national reform law in 2006 and operates an exchange known as the Connector. Utah established an exchange for small businesses in 2009.⁴
 
Other signed legislation: intent to establish or study exchange. Three states, in maroon on the map, passed legislation in 2011 that signals an intent to establish or study the establishment of an exchange in their states. North Dakota created an appropriation for the establishment of an exchange. Wyoming’s governor signed a bill that creates a study panel to investigate whether the state should establish a state health insurance exchange. The interim report recommended that the governor issue an executive order to establish an exchange. Mississippi also created a study committee that is investigating whether to build an exchange
on its Pre-Existing Condition Insurance Plan (PCIP), established under the reform law.

Legislation passed one or both houses. Three states, Alabama, Michigan, and North Carolina, have exchange legislation that passed in one house of their legislatures. Alabama’s bill passed in the 2012 legislative session. Bills in Michigan and North Carolina passed in 2011 but were carried over to the current session. These states are in turquoise on the map.

Legislation currently pending in one or both houses. Two states, Missouri and Ohio, have exchange legislation introduced in the 2012 legislative session that is pending (purple). New Hampshire’s Senate introduced an establishment bill in 2011 that was carried over to the current session.

Legislation introduced in one or both houses, but did not pass. Legislators in three states introduced legislation in 2011 to establish exchanges that ultimately failed or died because of adjournment (light purple) (Oklahoma, Pennsylvania, and Texas). While governors and legislatures in some states with 2011 failed bills have continued pursuing other legislative or gubernatorial options in the 2012 session, there has been no similar activity in these three states. The Texas legislature meets every other year and was not in session this year. Legislation introduced in the 2012 session in nine states, Alaska, Arizona, Georgia, Idaho, Iowa, Minnesota, Nebraska, New Mexico, and Virginia, has died due to adjournment.

Governors pursuing non-legislative options. Governors in six states, in mustard on the map, have pursued or are considering alternatives to establishing exchanges through non-legislative means such as executive orders. The governor of Rhode Island issued an executive order in September 2011 to establish an exchange, and New York’s governor issued an executive order in April of this year after an establishment bill made no progress in the legislature. Kentucky’s governor has indicated that he is prepared to issue an executive order to establish an exchange should the Supreme Court uphold the Affordable Care Act. Indiana’s governor has issued an executive order which allows the state to study and plan for an exchange. Governors in Arkansas and Montana are working with HHS on federally facilitated exchanges after legislation failed to pass.

Governors vetoed legislation or informed HHS they will not establish an exchange. Governors in Florida, Louisiana, Maine, South Carolina, and Wisconsin, in light blue on the map, have notified HHS that their states do not intend to establish exchanges. In May of this year, New Jersey’s governor became the second governor to veto legislation to establish an exchange. New Mexico’s governor vetoed legislation in 2011: the legislature introduced a bill to establish an exchange in this legislative session that died due to adjournment. In Louisiana, the state Senate moved a bill out of committee to establish an exchange, but the governor remains opposed to an exchange. Wisconsin’s governor repealed a prior executive order that had created the Office of Free Market Health Care, tasked with conditionally developing a plan for the design and implementation of an exchange. Maine’s governor informed HHS this spring that Maine was not in a position to establish a state exchange, and thus would not utilize a previously awarded federal exchange establishment grant.

States without legislative activity to establish an exchange. Four states, those in white on the map, have not had any legislative activity to create the legal authority to establish an exchange. But nearly all are moving forward with planning their exchanges regardless: Delaware, South Dakota, and Tennessee each have won grants to establish their exchanges from HHS (Exhibit 2).⁵
 

 Looking Forward

This year is critical for states that have not passed legislation, given that they must submit their Blueprint applications to HHS by November 16. While two states with exchange bills that are pending or passed (Ohio and Michigan) have legislatures that meet all year round, time is even shorter for many states. Legislatures in 27 states have already adjourned for the year and more will adjourn in May, including Missouri, where an exchange bill is pending, and Alabama, where an exchange bill passed one house. Two states with exchange bills pending or passed (New Hampshire and North Carolina) end their legislative sessions in July. It is possible other states may follow the example of Kentucky’s governor, who has indicated that he would issue an executive order to establish an exchange if the Supreme Court upholds the Affordable Care Act.

Planning for the exchanges continues apace in most states across the country, many of which do not have signed legislation in place. HHS has so far awarded 34 states and the District of Columbia multimillion dollar grants to establish their exchanges (Exhibit 2). HHS awarded Rhode Island and the state of Washington Level II establishment grants for more advanced exchange planning.

The Commonwealth Fund will update this blog post and map as implementation of the state insurance exchanges moves forward across the country.

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Notes
¹ "General Guidance on Federally-Facilitated Exchanges," Centers for Medicare and Medicaid Services, Center for Consumer Information and Insurance Oversight, May 16, 2012, http://cciio.cms.gov/resources/files/FFE_Guidance_FINAL_VERSION_051612.pdf; Timothy Jost, Implementing Health Reform: State-based, Partnership, and Federally Facilitated Exchanges, Health Affairs Blog, posted May 16, 2012, http://healthaffairs.org/blog/2012/05/16/implementing-health-reform-state-based-partnership-and-federally-facilitated-exchanges/
²“Draft Blueprint for Approval of Affordable State-based and State Partnership Insurance Exchanges,” Centers for Medicare and Medicaid Services, Center for Consumer Information and Insurance Oversight, May 16, 2012. http://cciio.cms.gov/resources/files/Exchangeblueprint05162012.pdf
³ The map and blog content are based on the National Conference of State Legislatures, Federal Health Reform: State Legislative Tracking Database (Washington, D.C.: NCSL), available at http://www.ncsl.org/default.aspx?TabId=22122; and press reports, including Politico.com and Politicopro.com.
⁴ S. Corlette J. Alker, J. Touschner et al., The Massachusetts and Utah Health Insurance Exchanges: Lessons Learned (Washington, D.C.: Georgetown University Health Policy Institute, March 2011), available at http://www.rwjf.org/files/research/72105massutah201103.pdf.
⁵ Healthcare.gov Fact Sheet, Creating a New Competitive Marketplace: Affordable Insurance Exchange Establishment Grants Awards List, Updated November 29, 2011, http://www.healthcare.gov/news/factsheets/exchanges05232011a.html