Health Care Deadline Looms: How States Are Setting Up the Exchanges

Dec. 13, 2012— -- All of the Affordable Care Act, also known as Obamacare, doesn't go into effect until 2014, but states are required to set up their own health care exchanges or leave it to the federal government to step in by next year. The deadline for the governors' decisions is today, and both Virginia and Florida are still undecided. Both are run by Republican governors, and they are the only states that have not made an official declaration one way or the other.

A spokesperson for Virginia Gov. Bob McDonnell said Friday that a decision was likely to come Friday afternoon, while the office of Florida Gov. Rick Scott said Thursday there was no update at the time.

The health insurance exchanges are one of the key stipulations of the new health care law. They will offer consumers an Internet-based marketplace for purchasing private health insurance plans.

But the president's signature health care plan has become so fraught with politics that whether governors agreed to set up the exchanges has fallen mostly along party lines.

Such partisanship is largely symbolic because if a state opts not to set up the exchange, the Department of Health and Human Services will do it for them as part of the federal program. That would not likely be well-received by Republican governors, either, but the law forces each state's chief executive to make a decision one way or the other.

Here's what it looks like in all 50 states and the District of Columbia:

20 states that have opted out -- N.J., S.C., La., Wis., Ohio, Maine, Ala., Alaska, Ariz., Ga., Pa., Kan., Neb., N.H., N.D., Okla., S.D., Tenn., Texas and Wyo.

Several Republican governors have said they will not set up the exchanges, including Chris Christie (N.J.), Nikki Haley (S.C.), Bobby Jindal (La.), Scott Walker (Wis.), John Kasich (Ohio), Paul LePage (Maine), Robert Bentley (Ala.), Sean Parnell (Ark.), Jan Brewer (Ariz.), Nathan Deal (Ga.), Tom Corbett (Pa.), Sam Brownback (Kan.), Dave Heineman (Neb.), John Lynch (N.H.), Jack Dalrymple (N.D.), Mary Fallin (Okla.), Dennis Daugaard (S.D.), Bill Haslam (Tenn.), Rick Perry (Texas), and Matt Mead (Wyo.).

3 States Out, but a Little More Complicated -- Mont., Ind. and Mo.

The Montana outgoing and incoming governors are both Democrats, but the Republican state legislature rejected the Democratic state auditor's request to start setting up a state exchange. So a federal exchange will be set up in Montana as well.

The Indiana outgoing and incoming governors are both Republicans and outgoing Gov. Mitch Daniels deferred the decision to governor-elect and U.S. Rep. Mike Pence, who said his preference is not to set up a state health care exchange, paving the way for the feds to come in too.

In Missouri, Gov. Jay Nixon is a Democrat, but Prop E passed on Nov. 6, which barred his administration from creating a state-based exchange without a public vote or the approval of the state legislature. After the election, he sent a letter to the Department of Health and Human Services saying he would be unable to set up a state-based exchange, meaning the federal government would have to set up its own.

1 State Waiting for the White House -- Utah

Utah already has a state exchange set up, a Web-based tool where small-business employees can shop and compare health insurance with contributions from their employee. In a letter Republican Gov. Gary Herbert sent to the White House Tuesday, he asked for its exchange, called Avenue H, to be approved as a state-based exchange under the Affordable Care Act as long as state officials can open it to individuals and larger businesses.

Norm Thurston, the state's health reform implementation coordinator, says authorities there "haven't received an official response" from the White House, but "we anticipate getting one soon."

There are some sticking points that don't comply with the exchanges envisioned by the Affordable Care Act and Utah would like to keep it that way.

"We never intended for our exchange to administer Medicaid, enforce the individual mandate [to have health insurance], or distribute federal tax credits," Herbert wrote in the letter.

Thurston says they want the federal government "just to say that what we have done is good enough, but I really anticipate there will be things they want to see a little more of."

Thurston anticipates the federal government will come back and say it needs "a little more information about this, a little more work here."

And that's not all Utah wants.

In the letter, Herbert asked the U.S. Department of Health and Human Services to certify Utah's exchange as compliant, as well as the minimum federal standard.

"I respectfully request that you instruct HHS to declare the Utah exchange model as the minimum federal standard," Herbert wrote. "I am confident that if you make this change, several other states will join Utah and request certification for 'state-based exchanges' based on our model."

19 State-Based Exchanges – Calif., Colo., Conn., Washington, D.C., Hawaii, Idaho, Iowa, Ky., Md., Mass., Minn., Miss., Nev., N.M., N.Y., Ore., R.I., Vt. and Wash.

6 Partnerships -- Ark, Del., Ill., Mich., N.C. and W.Va.

2 Undecided -- Va. and Fla.

That makes 23 states that will have federal exchanges, 19 states will have state-based exchanges (including the District of Columbia), six are planning on partnership exchanges between the federal government and the state, Utah is waiting on an answer from the federal government, and two states have not officially announced their decision: Virginia and Florida.

Virginia Gov. Bob McDonnell has repeatedly said he will likely reject the state-based exchange, paving the way for the federal government to come in, but an official response is likely to come Friday afternoon according to an aide.

Florida Gov. Rick Scott indicated last month that he was considering implementing a state-based exchange. He has made no official announcement either way and the Republican governor's office told ABC News on Thursday that they had no update on a decision, despite being a day away from the deadline.

Renee Landers, a professor of law at Suffolk University Law School in Boston who has written extensively on the new law, says if the remaining states don't make an official announcement by Friday, it's likely they will default to the federal exchange.

"If they don't decide to do it themselves, the default is the federal government will set it up," Landers said.

Landers boils down the decision by the nation's governors as this:

"If you want to wash your hands of [the ACA] as much as you can, entirely a federal exchange is your choice. But if you want as much control as possible, then the state exchange is the way to go; and the partnership, well every partnership is complicated," Landers said. "Sometimes it's nice to have the help, but on the other hand, you don't always get your way."

The Five Who Broke Party Lines

Not all of the country's Republican governors rejected the state-based exchanges: Iowa Gov. Terry Branstad, Mississippi Gov. Phil Bryant, Idaho Governor Butch Otter, New Mexico Gov. Susana Martinez and Nevada Gov. Brian Sandoval all decided to assert more control over the plan and, despite some grumbling, will set up the state-based exchanges.

"If the state really believes in federalism and state control, then operating its own exchange is the best way," Landers said."Its appeal is that it relies on competition in the market for health care coverage instead of a public system."

Landers says the new law also tells states they can form inter-state compacts and run exchanges by region, though none of the states decided to so. But "the federal government, in areas where they have contiguous states with a lot of shared markets, you can see the federal government saying, 'We won't have two infrastructures for those states, we will have one,'" the professor said.

One example could be New Jersey and Pennsylvania, two states that will have federal exchanges and are next to each other.

"I think it's funny that governors who purportedly want to be in charge of their own fate don't want to be involved [in setting up the exchanges]," Landers said.

"But then they have no responsibility for things that go wrong and there will be things that go wrong, mistakes will be made and they will have deniability."

This story has been updated since it was first posted.