Can states refuse to build exchanges?

The Affordable Care Act (ACA) calls on the states to create health insurance exchanges – marketplaces where individuals and small businesses can shop for and compare health insurance plans. Beginning in 2014, insurers peddling policies on an exchange will have to meet the ACA’s standards by covering “essential benefits,” capping out-of-pocket expenses for individuals, and offering more transparent information about costs and benefits.

Best of all, insurers will not be able to turn down customers suffering from chronic diseases, or charge them higher premiums.

So far so good.

But some states are attempting to derail “Obamacare.” Florida, Louisiana and Alaska have openly declared that they will have nothing to do with setting up exchanges. Last week, Politico.com reported that many others are stalling. The post quoted one consultant predicting that “between five and 10 states” will meet the 2014 deadline. The American Prospect confirmed the news, adding that some states that had begun making plans “have slowed down while awaiting the Supreme Court ruling on the health law.”

Tea Partiers celebrate such reports as a sign that health care reform is toast. Better-informed conservatives understand that even if states don’t create exchanges, the federal government will come in and do it for them. The law is very clear on this point.

This is why John Goodman, editor of the conservative Health Policy Blog, is urging states to move forward to design their own health insurance markets. “In principle, there is nothing wrong with a health insurance exchange,” he writes, as long as it is set up right. In order to retain as much control as possible, Goodman advises states to “engage in preemptive reform over the next two years”

The Supreme Court

Some in the chattering classes have suggested that the Supremes may toss out the entire law, including the exchanges, when they strike down the controversial mandate which requires that Americans buy insurance or pay a penalty. The legal question turns on whether mandate can be “severed” from the rest of the legislation, Washington and Lee law professor Timothy Jost explained in a phone conversation last week.

During oral arguments before the Court, two – perhaps three – of the Justices seemed taken with the idea that the mandate is “the heart of the law.” If this metaphor were true, and the mandate were eliminated, the ACA would be a corpse. But on a panel of nine, two who believe in metaphors do not constitute a majority.

As health policy veteran Linda Bergthold indicates in this Health Insurance Resource Center post, it is most likely that the body of the law will remain intact.  The court might overturn the mandate, but she writes “there are a number of ways to get around” that decision and forge ahead with reform.

Reform is a process, not an event

Still, it’s true that many states have been dragging their feet. How will they set up exchanges from scratch by 2014?

They won’t. They will have help.

First, health reform will be a process, not an event. The government made this point in a May 16 “draft blueprint” for the exchanges: “The process of establishing an exchange may extend beyond the first date of operation and may include improvements and enhancements to key functions over a … period of time.” The states will continue to receive grants throughout 2014, and they will have three additional years to spend the money.

During that time, the blueprint explains, the Department of Health and Human Services is willing to partner with them. Most likely, HHS will design enrollment, process applications for subsidies, and staff the call centers that will field the bulk of consumers’ questions.

“There is some efficiency to one entity” setting up Exchange IT, observes the Center on Budget and Policy Priorities’ Judy Solomon. There is no need for each state to reinvent the wheel.

“We have to be realistic;” the process “will be bumpy,” Solomon added in a phone interview last week. But “over the next couple of years … the political situation may change.”

Indeed, a J.D. Power & Associates study released in March reveals that voters already are becoming more aware of the exchanges – and the majority want the opportunities they will offer. Ultimately, Solomon suggests, even the most intransigent politicians will discover that “their residents want the coverage available in neighboring states.”

Maggie Mahar is an author and financial journalist who has written extensively about the American health care system. Her book, Money-Driven Medicine: The Real Reason Health Care Costs So Much, was the inspiration for the documentary, Money Driven Medicine. She is a prolific blogger, writing most recently for TIME’s Moneyland. Previously she wrote and edited the Health Beat blog for the progressive think tank, The Century Foundation. Previous work for the Health Insurance Resource Center includes Health reform: a huge victory for women. She also provides background on Congressional health care legislation for HealthReformVotes.org, a special project of the Health Insurance Resource Center.