Exchange Deadline Passes: 50% of States Default to Federally-Facilitated Exchanges

FEBRUARY 26, 2013 – 5:31 PMImage

As implementation of President Obama’s health insurance reform law continues, a major deadline has come and gone.

States were required to notify the U.S. Department of Health and Human Services (HHS) by Friday, February 15, if they planned to establish a state-based health benefits Exchange. If HHS did not receive notification, the state is deemed to default to a federally-run Exchange. Regardless of whether the state or federal government is in charge, the Patient Protection and Affordable Care Act (PPACA) requires that Exchanges be operational by October 1 of this year.

As of February 15, the following 26 states defaulted to a federal Exchange: Alabama, Alaska, Arizona, Florida, Georgia, Indiana, Kansas, Louisiana, Maine, Mississippi, Missouri, Montana, Nebraska, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Wisconsin and Wyoming.  As a result, the final tally implies the federal government will be tasked with implementing and maintaining Exchanges in at least half of the states.

Seven states are currently planning to implement a partnership Exchange, where the federal government will assist the states with certain portions of their Exchanges. Those states are Arkansas, Delaware, Illinois, Iowa, Michigan, New Hampshire and West Virginia.

Seventeen states and the District of Columbia are establishing state-based Exchanges. These states are California, Colorado, Connecticut, Hawaii, Idaho, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, Oregon, Rhode Island, Utah, Vermont, Washington and the District of Columbia.

The final count indicates that the federal government will be at least partially involved in 33 Exchanges, while 17 states and D.C. will maintain their own Exchange marketplace.

The divide largely mirrors the political divide in Washington – states with Democrats in power largely chose to establish Exchanges and states with Republican leadership mostly defaulted to federal Exchanges Lucy Nashed, spokeswoman for Governor Rick Perry, explains the state’s decision to default to a federal Exchange as “Texas is not interested in being a subcontractor to Obamacare.”  Other states have taken a less political approach. According to Christine Ferguson, director of the Rhode Island Health Benefits Exchange, “Many of the states have just run out of time for a variety of reasons. I’d be surprised if in the longer run every state didn’t want to have its own approach.”

While Friday appeared to be a hard deadline, HHS Secretary Kathleen Sebelius has indicated a willingness to continually work with states as they implement various provisions of PPACA.  Exchanges are the centerpiece of PPACA, and are a necessary corollary of the law’s individual mandate requirement that will take effect January 1, 2014.

Regardless of whether a state or the federal government takes control of an Exchange, leadership must move quickly to meet the October 1 deadline in order to begin the open-enrollment process for qualified health plan (QHP) coverage effective January 1, 2014. We will keep you posted on the progress made on Exchanges.

By:  Michael Gomes, Executive Vice President, BenefitMall

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