The Status of Health Insurance Exchanges

With less than two years before state-based health insurance exchanges are to be operational, most state legislators and health policy experts still cannot come to an agreement on how to set up, operate, monitor or fund state exchanges. However, despite persistent confusion and concerns surrounding health insurance exchanges, the White House recently released a report on the progress of state-level health insurance exchanges. This publication took a favorable and possibly misleading view of the headway being made by states that are creating their online insurance marketplaces.

The Administration claimed that there are currently 28 states making great progress in establishing an exchange. Even if that were true, this indicates that 22 states  -or about 40 percent- are refusing to comply with the Patient Protection and Affordable Care Act (PPACA).

Although the report does not lie, it also doesn’t exactly accurately portray where most states stand either… The Administration chose to furtively count states that fall into a grey area as making progress toward setting up an exchange. Many states have, in actuality, refrained from any legislative activity or the state legislature has merely set up a committee to “study options”. What this really indicates is that many states are purposefully not complying with the PPACA mandate to create an exchange, but also managing not to violate it so that they are allowed to keep federal funding, at least until the January 2014 deadline.

The figure illustrates exchange status more accurately by categorizing, into six categories, where states stand in terms of state-based exchange implementation. These classifications range from states that have already established an exchange to states who have taken legislative action not to create an exchange.

As the White House rightly exhibited, there are a few states that have made significant progress in setting up an exchange and benefited greatly from the extra federal dollars. Rhode Island recently received an additional $60 million from the federal government for their collaboration with Massachusetts and Vermont to improve system integration associated with health insurance exchanges. California, Colorado and Washington have also seen legislation signed into law following the passage of PPACA to implement a state health insurance exchange.

In contrast, based on a February 2012 analysis of all states, Figure 1 shows that five states have no legislative activity whatsoever related to a health care exchange; and several states such as Wisconsin, Louisiana and Florida not only rejected setting up an exchange, but returned the grant money bestowed to them from the federal government to establish an exchange. More common scenarios, and where Figure 1 differs from the White House, are that many states are merely “investigating options” or allowing an exchange bill to bounce around legislative committees but never go to a vote. These alternatives allow states to keep their federal funding, but take no action to set up an exchange.

For example, the state of North Carolina had a Republican majority who drafted an exchange bill. That bill, however, was moved from one committee to another over than span of months for “reading.” For the past year, that same bill hasn’t seen the light of day and the Republican majority has no intention of ever letting it. This way, the state is allowed to spend federal exchange dollars, but not actually carry out the Administration’s plans. New Hampshire also had an exchange bill written, but after passing the Senate, that bill failed to pass the House of Representatives. In doing so, New Hampshire was allowed to keep exchange funding, but use the stalemate as a way of not having to revisit the idea of exchange implementation until a future session. South Carolina on the other hand used the original Exchange Planning Grant from the federal government to create an exploratory committee on exchanges, but decided after its creation that no legislation should be written.

As the economic crisis continues, unemployment remains high and the Supreme Court prepares to hear oral arguments for various provisions of PPACA in March, the number of states moving forward with enacting an exchange should become stagnant. This could further undermine the “progress” being made by states that fall into the grey area. Regardless, whether states are stalling efforts to create state-level exchanges, “studying” alternative options and costs, or flat out rejecting the idea, it’s safe to say that the optimism demonstrated in the White House report is a bit rosier than the real state of state-level health insurance exchanges.

Nicole Fisher is the senior policy director at Health Systems Innovation Network where she focuses on Medicare, Medicaid and health reform. She is a PhD student at the University of North Carolina in the Health Policy and Management Department. This post appeared at Wright on Health.

13 replies »

  1. Your suggestion is sensible, popular and obvious. But just in the last couple of days I heard an interesting statistic about the costs of health care.
    One study of a population in the Northeast revealed that a third of all costs were generated by less than five percent of the patients. And in another analysis of a larger data base something like one percent of costs come from 30 percent of patients, mostly elderly, with end-of-life expenditures.


    At some point a lot of everyday people are gonna have to face some really uncomfortable realities, including the fact that the one appointment we all have in common is that last one with the angel of death.
    Every time I see another comment about costs it triggers the evangelist in me to preachi about the importance of advance directives.

  2. I agree health care cost are going up and up. people may need to get more involved in taking care of themselves. I’d like to see health insurance company’s give insurance breaks to people that do the wellness check ups regulary, get flu shots, blood test and so.

    I still have family and friends that never go to a doctor or if they do, don’t renew the pills the doctor prescribes. One friend after much nagging from all his friends went to a doctor to find a stage 4 cancer growing inside him. Empower your self go for wellness checkups.

  3. “According an item in a recent Health Wonk Review, over 47% of the uninsured did not think that ObamaCare had any benefits for them.
    Yet this is one group that the new law is really designed for!
    Franklin Roosevelt would never have had a social insurance program where 47% of the beneficiaries did not even know they were going to get it!”

    Fully agreed- great point!!

  4. Good point.

    As an aside, watching the current level of irrational discussion conflating womens health issues with religious objections, I wonder if the fire is being deliberately stoked by the insurance industry with a view of uncoupling employment and insurance as we discussed above. If so the ulterior motive would be plain since TPA’s are beholden to the groups being served, whereas insurance plans in the marketplace can be their own bosses.

    Just a thought. But I doubt many in the business can see that far into the darkness.
    Should it come to that, the need for a public option — or at least a compelling need for a more robust community health system — would be a logical result.

  5. As Matthew says above, a federal exchange is preferable.

    When that becomes apparent, the Democrats need to do a much better job of getting public support for subsidies.

    According an item in a recent Health Wonk Review, over 47% of the uninsured did not think that ObamaCare had any benefits for them.

    Yet this is one group that the new law is really designed for!

    Franklin Roosevelt would never have had a social insurance program where 47% of the beneficiaries did not even know they were going to get it!

    In his book Deer Hunting with Jesus, the late Joe Bageant attributed this to working people getting all their news from talk radio and Fox News.

    Bob Hertz, The Health Care Crusade

  6. If I read your color coding correctly, you have Oregon in the category of “legislative decision not to create.” But I keep hearing on the news here that the legislature has a bill pending and it is on the verge of passing it. Can you double check and update your map accordingly?

  7. How is two bills in legislative committee classified as ” No legislative action to date”?

    Do you even research anything before you print it?

  8. This is good news, By default and Republican idiocy we’ll end up with a Federal exchange–which we should have had in the first place

  9. I’ve complied and have been reviewing an inch and a half thick comb-bound assemblage of the PPACA SCOTUS amicus briefs. Very interesting how highly educated people can come to such divergent conclusions based on the same set of facts.

    (yeah, I have no life — I am also now reviewed the just-released NPRMs concerning Meaningful Use Stage 2 and the companion 2014 CEHRT)

    But, it goes to “Why Do Humans Reason?”


    (Hint: not get get at truth, but to Get Over)

    And, that’s just excluding the “willfully ignorant”. (and, even worse are those characterized in Dr. Harry Frankfurt’s book “On Bullshit.”)

  10. You got that right.

    As I was listening to a radio program today rehashing that “mandate” argument how government shouldn’t tell the private sector what to do and how best to run a business — I thought about Georgia’s “no-fault” insurance by which medical payments are to be paid by the insured person’s company, no matter who is “at fault.” At some later date the companies might contest who is liable and one company may go after another via subrogation, but injured parties have their medical bills picked up by their own insurance.

    That strikes me as an open and shut case of state government telling the private sector what they must do. The same principle is at work when safety regulations and building codes are changed, almost never in ways that will make costs go down, only up, up, up…

    And here we are, with states getting federal money to do the responsible thing, and instead many are stonewalling which will make federal intervention inevitable. And the states that are in denial will be the ones that raise the strongest objections when PPACA is forced to intervene.

    My mother had a great saying for such stubborn behavior. She called it playing dog in the manger. The dog can’t eat the hay, but he won’t let anyone else get at it either. We live in sad and willfully ignorant times.

  11. Four months, and we’ll know whether PPACA gets struck down by The Supremes. Lotta stuff will go down with the ship should that happen.