Gov. Jan Brewer will not pursue a state-run health insurance exchange, opting instead to have the federal government set up an exchange in Arizona.
The U.S. Department of Health and Human Services recently extended the deadline for states to decide whether to implement their own exchanges until Dec. 14. Brewer, who had originally planned to announce her plans on the Nov. 16 deadline, delayed the decision, saying she needed more information about the cost of a state-run exchange and other issues.
But with more than two weeks to go before states’ letters of intent are due to HHS, Brewer on Wednesday informed HHS that Arizona would opt out of the state-run exchange. The governor said there are too many unanswered questions about how an exchange would work, too great a cost to the state and that Arizona would still have little actual control over a state-based exchange.
“This has been one of the more difficult decisions of my career in public service,” Brewer said in a press statement. “There simply remains too much we don’t know about how a state-based exchange would function and its ultimate cost to taxpayers. Without clear federal guidance and instruction, I cannot in good conscience commit the taxpayers of my state to this costly endeavor.”
Brewer said a recent study by the consulting firm Mercer showed that a state-run exchange would cost Arizona $27 million to $40 million per year.
The question of whether Brewer would seek to implement the online insurance marketplace herself or let HHS do it has loomed over the Capitol for more than a year. Brewer hired Don Hughes to serve as executive director of the exchange and Arizona has spent nearly $9 million in federal grant money to help lay the groundwork for the exchange, primarily on IT development, consulting and salaries.
In her letter to Gary Cohen, the director of HHS’s Office of Consumer Information and Insurance Oversight, Brewer said has made significant progress in its planning for an exchange. But HHS failed to provide the information the state needs, she said.
“The failure of the Center for Consumer Information and Insurance Oversight and Center for Medicare and Medicaid Services to timely issue detailed regulations, written guidance and inform states when required federal services will be made available has made it impossible for Arizona and other states to make informed decisions on proceeding with a state-based exchange,” Brewer wrote.
The decision heads off what was widely expected to be a contentious intraparty battle between Brewer and GOP lawmakers, who are predominantly opposed to implementing the exchange, a key component of the Affordable Care Act. Republican legislators are hesitant to legitimize any provision of President Barack Obama’s signature health care law and worry about the costs to Arizona and the effects it will have on the health care system.
Brewer’s decision was met with praise from Republican legislative leaders. Incoming Senate President Andy Biggs said he appreciated Brewer’s thoughtful deliberation on the exchange issue.
“I concur with her opinion on the drawbacks of a state-created but federally-controlled exchange. Any exchange run by Arizona would still include an inappropriate imposition by the federal government on our state,” Biggs, R-Gilbert, said in a press statement.
House Speaker Andy Tobin said he wasn’t surprised, considering the lack of support for a state-run exchange among Republican lawmakers, as well as the lack of communication from the Ninth Floor on the issue since the election.
“I didn’t have a single member pick up the phone and call me and say ‘Hey, I’m a yes vote on the state exchange.’ Not a single one,” said Tobin, R-Paulden. “This is not a surprise to me. I think the governor made a good choice today.”
Meanwhile, legislative Democrats lambasted Brewer.
House Minority Leader Chad Campbell said he was shocked by the decision because Brewer and GOP lawmakers so often complain about the federal government imposing its will on Arizona. Campbell disagreed with Brewer’s assertion about the amount of control Arizona would have over a state-based exchange.
“For all the talk we hear down here from the tea party legislators and from Gov. Brewer over the last several years about how big and bad the federal government is, to then forgo an opportunity to have state control over one of the most important things we have to undertake and hand it off to the feds, it’s mind-boggling to me,” said Campbell, D-Phoenix.
Senate Minority Leader Leah Landrum Taylor, D-Phoenix, also disagreed with Brewer about local control.
“This is a missed opportunity to establish healthcare solutions that are tailor-made for the unique needs of our state. I would think the governor would want to be involved in decisions affecting the well-being of Arizonans,” Landrum Taylor said in a press statement. “That said, we remain available to help ensure that the federally-facilitated exchange meets the needs of the people of Arizona.”
A broad coalition of health care industry figures, business interests and others has urged Brewer for months to support a state-run exchange. The coalition and other supporters said a state-run exchange would give Arizona more control and that the state would run it better than the federal government would.
One member of that coalition, the Arizona Hospital and Healthcare Association, said it was disappointed but not surprised by Brewer’s decision. Association spokesman Pete Wertheim acknowledged that it would have been an uphill climb to get legislative approval for a state-based exchange.
“We know if we were to go forward with a state-based exchange it would really only be the beginning. There’s still large faction that are opposed to the creation of a state-based exchange
Wertheim said the association will now focus its attention on the restoration of Medicaid coverage for childless adults who lost coverage during budget cuts in the last several years. The restoration of the Proposition 204 population is expected to be a major issue in the 2013 legislative session.
He also said he hopes the issue can be revisited at some point. States with federally run exchanges have the option of switching to state-based exchanges in future years.
Conservative organizations such as Americans for Prosperity’s Arizona chapter and the Goldwater Institute also insisted that Brewer’s rejection of the state-run exchange would shield Arizona businesses from some of the more onerous aspects of the Affordable Care Act, such as the “employer mandate” that imposes $2,000-per-employee fines on many businesses with at least 50 employees that don’t provide health insurance coverage.
The groups argue that the Affordable Care Act only authorizes state-run exchanges, not federally run exchanges, to impose that penalty. An IRS rule from May seeks to impose the penalty through federally run exchanges as well, and is part of a lawsuit by the state of Oklahoma against the health care law.
Brewer’s decision makes her the most recent name on a growing list of Republican governors to reject state-run exchanges in recent weeks. Georgia Gov. Nathan Deal, Oklahoma Gov. Mary Fallin, Texas Gov. Rick Perry and Wisconsin Gov. Scott Walker have all announced recently that they will not implement insurance exchanges in their states.
Some states, including Arkansas, Delaware, Illinois, Michigan, North Carolina and Ohio, chose a third option that allows them to implement an exchange in partnership with HHS.