Republican Governors Make Choices on Exchanges

Published April 1, 2011

One of the key requirements under President Obama’s health care law is that each state set up a functioning health insurance exchange by 2013.

The exchanges, based on those currently running in Utah and Massachusetts, are government-managed conduits allowing state bureaucracies to organize and regulate the way insurers sell policies to consumers.

The federal government has provided incentives in the form of taxpayer funding for states to create the exchanges, setting up a key early policy decision for many Republican governors. Although all Republican governors are on record as opposing the health care law, they must decide soon whether to implement the exchanges and whether to push for a sunset provision requiring the exchange be rolled back should Obama’s law be repealed or struck down by the courts.

Most GOP Governors Complying

Spokesmen for newly elected Republican governors Robert Bentley of Alabama, Mary Fallin of Oklahoma, John Kasich of Ohio, and Terry Branstad of Iowa confirmed they were planning to set up an insurance exchange as mandated by Obama’s law. Rob Nichols, press secretary for Gov. Kasich, expressed a typical rationale for organizing the exchanges at the state level.

“We cannot let the insurance exchange default to federal control, so we are moving forward with the planning that is required to make the exchange work best for Ohio,” Nichols said.

Spokesmen for Republican Governors Chris Christie of New Jersey, Jan Brewer of Arizona, Dave Heineman of Nebraska, Jack Dalyrmple of North Dakota, Rick Perry of Texas, Mitch Daniels of Indiana, Scott Walker of Wisconsin, and Butch Otter of Idaho confirmed they were arranging boards and stakeholder meetings to determine how to set up an exchange. However, many of these spokesmen, such as Jon Hanian, press secretary for Gov. Otter, stressed they had not yet reached a decision on the matter, noting the planning process does not dictate an outcome.

“Elements of our working group have been meeting informally for several months to address issues related to the insurance exchange,” Hanian said. “The other two working groups are Health Care Delivery and Information Technology, and they have not met yet. In other words, we are still deciding.”

In some states, such as Oklahoma, the planning process was begun by Republican legislators before federal law was passed. In others, such as Wisconsin, the process is beginning with the creation of specific offices. In January, Gov. Walker announced the creation of an Office of Free Market Health Care assigned, among other tasks, with developing “a plan for the design and implementation of a Wisconsin health benefit exchange that utilizes a free-market, consumer-driven approach.”

Scott, Jindal Defiant

Not all Republican governors are planning to create the mandated exchanges.

A spokesman for Florida Gov. Rick Scott, a former health care executive, confirmed he does not currently plan to set up an exchange. Scott has even directed Florida’s insurance commissioner to return the $1 million federal grant to study an exchange requested under the prior administration.

The office of Louisiana Gov. Bobby Jindal, a former secretary of health for his state, confirmed the governor does not plan to set up an exchange.

Sunset Provisions Considered

Most of the other Republican governors, including Branstad, Brewer, and Virginia Gov. Bob McDonnell, are considering defying the law in a less direct manner by employing a legislative sunset provision. Christie Herrera, head of the American Legislative Exchange Council’s health care task force, said the sunset provision helps state legislators who are trying to find a responsible path.

“Legislators are torn between refusing to comply with ObamaCare and moving forward with implementation, and rightly so. Much of this law might be repealed, defunded, or struck down by the Supreme Court,” Herrera said. “Some states might feel compelled to set up an ObamaCare exchange, fearing what they’ll end up with if they don’t comply with the new law.”

Herrera says a sunset clause would allow governors to roll back the exchanges if ObamaCare is repealed or found unconstitutional.

“Adding a sunset clause to any ObamaCare exchange legislation might bridge the gap between pro-exchange and anti-exchange state legislators,” Herrera said. “A sunset clause allows states to shed these massive, federally dictated health insurance exchanges if that ObamaCare provision is repealed or struck down in court. It’s just the responsible thing to do.”

Virginia’s legislation directing the planning of the exchange currently has a sunset clause, and other states are looking into following suit.

Barbour Embraces Exchange

Of all the Republican gubernatorial offices contacted for this story, only Gov. Haley Barbour of Mississippi rejected the idea. Barbour spokesman Dan Turner noted legislation to establish a health insurance exchange in Mississippi had previously passed in the state Senate three years in a row, only to be stopped in the state House.

“Gov. Barbour began pushing for a health insurance exchange in Mississippi before President Obama was elected,” Turner said. “A key point to remember is that the health exchange Gov. Barbour wants is significantly different than what Obamacare envisions. The governor wants a market-based exchange with competition among providers, rather than a government-controlled exchange. As for a sunset? No.”

Yet Herrera maintains the exchanges will ultimately have a very limited window for such consumer-driven formats, instead taking their regulatory cues from HHS.

“Talk of state collaboration and market-based solutions is predicated on the assumption that HHS Secretary Kathleen Sebelius will approve an exchange that deviates from the heavily regulated structure set forth in ObamaCare,” Herrera said. “Most people believe that is very unlikely to happen.”

Benjamin Domenech ([email protected]) is managing editor of Health Care News.