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Some states move forward with exchanges despite opposition to health care law

Virginia Gov. Bob McDonnell gestures as he prepares to sign a bill during a signing ceremony in Richmond, Va., June 21. (Steve Helber/Associated Press)

Arizona is far from alone in balking at the creation of a state-run health insurance exchange, though other GOP-led states are putting aside their opposition to the federal health care law and implementing one of its more controversial provisions.

Under the Patient Protection and Affordable Care Act, states must set up health insurance exchanges by 2014 or the federal government will do it for them. Ironically, some of the law’s staunchest opponents are making the most progress in establishing their exchanges.

Health insurance exchanges are marketplaces in which people or small businesses can purchase coverage en masse in order to get better prices on their policies. The exchanges, which will ultimately be Web portals, are a key component of the Affordable Care Act.

Nearly every state has accepted the

$1 million planning grants that the U.S. Department of Health and Human Services provides so states can develop plans for their health insurance exchanges, including most of the 28 that are suing the federal government over health care overhaul. A dozen states have passed laws either creating exchanges or laying the groundwork, while governors in two others have done so by executive order.

In Virginia, which is spearheading one of the lawsuits, Republican Gov. Bob McDonnell signed a bill in April that established the state’s intent to create its own insurance exchange. And in Alabama, Republican Gov. Robert Bentley signed an executive order creating a study commission that will lay the groundwork for a state-run health insurance exchange.

Virginia still opposes the Affordable Care Act and the April bill even included a clause stating that the state does not recognize the law’s constitutionality. But that doesn’t mean the state wants the federal government running its exchange, said McDonnell spokeswoman Taylor Thornley.

“We’ve said from the get-go that we want to ensure that Virginia is ready, should Obama’s health care legislation become law. We don’t want to be caught off guard,” Thornley said.

Among the 50 states, only Alaska refused the planning grant money from HHS. Former Republican Minnesota Gov. Tim Pawlenty initially turned down the money as well, but Democratic Gov. Mark Dayton reversed the decision after taking office. And Florida and Louisiana accepted, but later returned the grants. Three states have applied for the second round of grants, and Arizona Gov. Jan Brewer plans to do so as well.

Alaska Gov. Sean Parnell said he refused the grant because his state would not “proceed down an unlawful course” to implement the Affordable Care Act after a federal judge in Florida declared it unconstitutional. But even Alaska is moving forward with plans for an exchange. Bill Streur, commissioner of that state’s Department of Health and Social Services, said Parnell plans to run a bill to create the exchange in 2012.

“We don’t believe in it. We will not support it. But we are developing our own contingency plan should it be confirmed as the law of the land,” Streur said of the Affordable Care Act.

Not everyone is developing contingency plans, however. Florida, which initiated a 26-state lawsuit against the health care law that Arizona joined, declared that it will not create a health insurance exchange unless the U.S. Supreme Court deems the health care law to be constitutional. New Mexico Gov. Susana Martinez vetoed a bill that would have created an exchange in her state. And in May, Louisiana Gov. Bobby Jindal announced that his state would not take part in a state-run exchange.

Larry Levitt, vice president for special projects at the Kaiser Family Foundation, said he expects most states to establish their own exchanges. But in states where the governor or Legislature is hostile to Obamacare, as its opponents have dubbed it, some are hesitant to give the appearance that they support the law by establishing an exchange.

“That’s the tension in states where the leadership is on record opposing the health reform law. Does moving ahead with a state exchange somehow conflict with your underlying opposition to the law or, at some point, are you a realist and decide that (it is) going to happen with me or without me, and it’s better if it happens with me?” Levitt said.

That tension is playing out in Arizona, where Brewer is making tentative plans for a state-run exchange. Some GOP lawmakers are taking the same stance as Alaska and Virginia, but others are determined to oppose all vestiges of the law.

Sen. Frank Antenori, R-Tucson, said he isn’t convinced by arguments that Arizona should set up its own exchange so it will have some autonomy over it.

“I don’t think that’s the argument. If we believe it’s a bad idea, then we should stick to our guns and say it’s a bad idea and oppose it in every way possible,” he said.

One problem states face in planning for the exchanges is that many of the guidelines they’ll have to adhere to are a mystery. The federal health department plans to release guidelines in the fall for the “essential health benefits” that insurance purchased in the exchanges must include, and some states are wondering how those guidelines will affect the mandates they already have in place.

For example, Arizona mandates that health insurance providers must cover autism treatment. If the federal health department’s essential health benefits don’t include autism coverage, Levitt said, Arizona may be forced to either eliminate the mandate or help cover the cost of the tax credits that the feds will use to help low- and middle-income patients purchase health insurance.

But despite the 2014 deadline for implementing the state-run exchanges, Levitt said states can afford to take the wait-and-see approach.

“It’s a little bit of a game of chicken. I think, in the end, the federal government will be reticent to step into a state if the state is showing any movement,” Levitt said. “If it looks like a state is close or has an interest in moving forward, I suspect it might not be a hard deadline.”

Two states actually had their own health insurance exchanges prior to the Affordable Care Act’s passage in March 2010. Massachusetts established an exchange in 2006, while Utah followed suit in late 2009. Both are waiting to see what, if any, changes will be needed once the federal health department releases its guidelines in the fall.

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