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How states are dealing with the exchanges

Politics drive state decisions on control, implementation of health insurance exchanges

Throughout the final months of 2012 and continuing into 2013, stories about health insurance exchanges moved from wonky publications to mainstream media. The Affordable Care Act (ACA), passed in March 2010, called for the creation of an exchange in each state – so the idea wasn’t exactly breaking news. Rather, health insurance exchanges – also called health insurance marketplaces – emerged as yet another battleground in the political fight over the ACA.

Opponents haven’t stopped fighting the ACA since its passage. The U.S. House has voted 37 times to repeal or defund all or parts of the law. None of these efforts has gained traction with Democrats who controlled the Senate.

Twenty-six states joined a federal lawsuit trying to overturn the ACA, but the Supreme Court upheld all but one of the challenged provisions. Many citizens voted for Mitt Romney hoping he would overturn the law, but President Obama was re-elected. With all of these avenues blocked, some states continued to resist ACA by refusing to act on health insurance exchanges.

States’ options

The U.S. Department of Health and Human Services (HHS) outlined three exchange models:

  • State-run exchange – Under this option, the state operates all aspects of the exchange.
  • State-federal partnership – Under this option, the state performs some functions, while HHS performs others.
  • Federally operated exchange – Under this option, HHS will operate the exchange.

While some states began evaluating the options nearly immediately, others charged the federal government hadn’t provided enough information to support a decision and that none of the options gave states any meaningful control. Knowing the political leanings in a state made it fairly easy to predict how states would proceed.

How states approached the exchange decision

Early adopters – A handful of states jumped into exchange planning shortly after the ACA passed. California was the first state to pass legislation authorizing an exchange – doing so in September 2010. ColoradoConnecticutHawaiiMarylandOregonVermont and Washington all authorized state-run exchanges in 2011. Massachusetts and Utah were operating exchange prior to ACA, and both are moving ahead on changes needed to comply with ACA requirements.

States that moved quickly to establish exchanges are generally blue states. Obama carried all but Utah in both 2008 and 2012, and many of the early adopters have Democratic governors.

Pragmatists – A number of states took a pragmatic approach. Despite the uncertainty about the ACA in general and exchange requirements in particular, the pragmatists did enough work to keep their options open.

In some cases, legislatures failed to authorize exchanges, yet federal grants were accepted and spent as executive branches authorized significant planning work to proceed. Minnesota is a good example. While the Republican-controlled legislature failed to authorize an exchange in 2011 or 2012, Democratic Gov. Mark Dayton’s administration made quiet, extensive progress on an exchange.

Dayton used an executive order to appoint a task force that has been active since October 2011. Minnesota has been awarded about $75 million in federal grants. In November 2012, Minnesota submitted a letter of intent and blueprint for a state-run exchange. The November elections returned both the House and the Senate to Democrats, who passed exchange legislation in March.

Some states remained opposed to the ACA, but took the position that if the state must have a health insurance exchange, it is better for the state to run it than the federal government. Idaho is an example. Republican Gov. Butch Otter is on record opposing the ACA. However, shortly after the Supreme Court upheld most ACA provisions, Otter established workgroups to consider a state-run exchange and expansion of the Medicaid program. Otter announcedin December that Idaho would run its own exchange.

Passive resisters – A few Republican-controlled states took the approach opposite to that of Idaho: they are opposed to the ACA and have done little or nothing to establish an exchange. States in this category include PennsylvaniaSouth Dakota and Wyoming. All three eventually opted for federally run exchange.

Active resisters – A number of states – mostly led by Republican governors adamantly opposed to the ACA – said early and often that they would not implement state-run health insurance exchanges. AlaskaFloridaLouisianaSouth Carolina and Texas are all examples.

These states turned down and returned federal grant money for exchange planning. Some have passed laws and constitutional amendments banning a state-run exchange. Oklahoma continues to fight the ACA in court. State Attorney General Scott Pruitt claims that penalties for businesses who don’t offer healthcare insurance to employees should apply only in the case of state-run insurance exchanges. Since Oklahoma will have a federally run exchange, its employers would be exempt from penalties.

The tally

Ultimately, 16 states (and Washington D.C.) are planning state-run health insurance exchanges, seven states are planning state-federal partnerships, and 26 states opted for the federal exchange. See what your state has decided.