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The state of your health insurance marketplace

Politics and practicality influence 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.

Twenty-six states joined a federal lawsuit trying to overturn the ACA, but in 2012 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 Obam a was re-elected. With all of these avenues blocked, some states continued to resist ACA by refusing to act on health insurance exchanges.

And to be clear, opponents are still fighting the ACA, more than five years after its passage. The U.S. House has voted 59 times to repeal or defund all or parts of the law. None of these efforts gained traction with Democrats who controlled the Senate through the end of 2014, but Republicans gained a majority in the Senate in 2015, and Senate Majority Leader Mitch McConnell has made it clear that repealing Obamacare is one of his priorities.

So although states’ decisions on the operational aspects of their exchanges is still frequently a reflection of the state’s support or opposition for Obamacare, there have also been technical issues over the last two years that have caused some states to adjust their exchange model for logistical – rather than political – reasons.

States’ options

Initially, there were only two options from which states could pick: A state could run its own exchange (state-based exchange) or it could opt to have the federal government run the exchange (federally-run exchange).

Then in the summer or 2011, HHS added a state partnership exchange model as a variation of the federally-run exchange. In a partnership exchange, enrollment is conducted through Healthcare.gov, and the state uses the federal call center, but the state can retain functions like outreach and education, as well as oversight of participating plans.

In early 2013, HHS also allowed for a marketplace plan management exchange, which is another variation of the federally-run exchange. States utilizing this option are generally categorized together with the states that have left the entire process to the federal government, but they retain plan management functions, which includes certification of plans that are sold in the exchange, as well as monitoring and regulatory control over the plans that are sold (similar regulatory processes were already undertaken by insurance commissioners in many states prior to the implementation of the ACA).

In June 2013, HHS also outlined provisions for a state to operate a bifurcated exchange, with the state running the small business (SHOP) exchange, and the federal government running the individual exchange. Initially, only Utah took this approach, but Mississippi started running its own SHOP exchange in May 2014.

For states that want to run their own exchange but also rely on the economies of scale and technological success of Healthcare.gov, another option is a supported state-based exchange, which is considered a variation of the state-run exchange model. In a supported exchange, the state is in charge of its own exchange, but enrollment is done through the Healthcare.gov platform. This option was created once it became obvious that Idaho and New Mexico – both of which had received conditional approval to run their own exchanges – wouldn’t have their own enrollment platforms ready to go by October 2013.

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. Colorado, Connecticut, Hawaii, Maryland, Oregon, Vermont and Washington all authorized state-run exchanges in 2011. Massachusetts and Utah were operating exchanges prior to ACA, and both began 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 had 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 began working in October 2011, and Minnesota was 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 2013.

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 in 2012, Otter established workgroups to consider a state-run exchange and expansion of the Medicaid program. Otter announced in December that Idaho would run its own exchange.

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

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. Alaska, Florida, Louisiana, South 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 fought bitterly against the ACA in the court system, with Attorney General Scott Pruitt arguing that the employer mandate and the ACA’s premium subsidies are both prohibited in states – like Oklahoma – that have a federally-run exchange.

The tally

For 2014, 16 states and Washington D.C. opted for state-run health insurance exchanges, seven states established state-federal partnerships, and 27 states opted for the federal exchange. Although most states are still following the same model they used in 2014, there have been some minor changes in the ensuing two years. See what type of exchange your state currently has.

Of the 17 state-run exchanges, three are now functioning as supported state-based marketplaces (New Mexico, Nevada, and Oregon), and Hawaii will complete the transition to a supported state-based marketplace by October 2015. New Mexico had intended to use the supported model for 2014 only, but in early 2015, the exchange board decided that continuing to use Healthcare.gov for enrollment was in the exchange’s best interest. Nevada and Oregon both struggled with serious technological problems in 2014, and Healthcare.gov allowed their enrollment and re-enrollment process to go much more smoothly in 2015. Hawaii maintained their own exchange enrollment platform in 2014 and 2015, but ultimately opted to become a supported state-based marketplace due to funding problems. So for 2016, there will be only 13 states that are running all aspects of their own exchanges. But Idaho – which had a supported state-based exchange model in 2014 – is among them, and has been running its own enrollment platform since the second open enrollment began in the fall of 2014.

There are still seven partnership exchanges and 27 federally-run exchanges. Among the states that have a federally-run exchange, seven have marketplace plan management exchanges: Kansas, Maine, Montana, Nebraska, Ohio, South Dakota, and Virginia.

For the first half of 2015, there was significant concern about the King v. Burwell lawsuit among states with federally-run exchanges and partnership exchanges. The lawsuit hinged on the argument that the ACA only allows for subsidies to be provided by exchanges “established by the state.” Since subsidies are a cornerstone of every state’s exchange, the prospect of losing those subsidies was alarming; several states considered the possibility of building their own exchanges if subsidies were to be eliminated. But on June 25, 2015, the Supreme Court ruled 6 – 3 that subsidies are legal in every state, regardless of whether the state or federal government runs the exchange.

Arkansas has received conditional approval from HHS to operate their own SHOP exchange in 2016 and to have a state-based individual exchange starting in 2017. But now that the Supreme Court has upheld subsidies in the federally-run marketplace, lawmakers in Arkansas are considering whether or not to proceed with plans to establish a state-based marketplace.

Pennsylvania and Delaware also received conditional approval from HHS to create state-run exchanges, but both states dropped those plans once the Supreme Court issued the ruling in King v. Burwell.