State Capitol News
5:28 pm
Wed November 28, 2012

Gov. Brewer Rejects State Designed Insurance Exchange

It will be the federal government and not the state that will be running the new health insurance exchanges.

The federal Affordable Care Act contains many provisions. Perhaps the best known is the mandate that individuals have health insurance or face a fine. But the law also includes a provision for health insurance exchanges. In essence, each state's exchange would be is a spot where those who do not qualify for Medicaid but meet other income requirements could shop for subsidized health insurance. The only question was whether the state would run its own exchange or leave it to the federal government. On Wednesday, Gov. Jan Brewer opted out of an Arizona-run exchange. Gubernatorial press aide Matthew Benson said that under normal circumstances she would choose to have the state in charge.

"But ultimately this came down to three major issues for the governor: the cost in building and operating a state exchange, the lack of true authority the state would have over that exchange, and the continuing uncertainty over all these various rules and guidelines on how that exchange would run," Benson said.

The governor's decision is a defeat for hospitals, some health insurers and patient advocate groups. They had argued there's a real benefit for having the state run its own exchange rather than the federal government. Pete Wertheim of the Arizona Hospital and Healthcare Association said the move is going to make life more difficult.

"The challenge is going to be if there's a change that we'd like to see in the design of the exchange, or if there's a payment issue or there's some sort of a grievance or a design issue that we would hope to influence, it's going to be much more challenging dealing with a federal agency as opposed to a state-based or a locally controlled health insurance exchange," Wertheim said.

That's also the assessment of Linda Lopez, the number 2 Democrat in the state Senate. She said a local exchange would mean local input. And she chided the governor for her decision.

"I just find it, you know, puzzling that the governor who has objected to the feds coming in and telling the state of Arizona what to do now is willing to turn this over to the feds," Lopez said.

But Clint Bolick of the Goldwater Institute, which opposes not just the exchanges but the entire Affordable Care Act, dismissed the argument that a state-run exchange would mean local input.

"That's a facade," Bolick said. "The control remains entirely in the hands of Washington, D.C.  The costs are shifted to Arizona. So it's a replay of what we've seen in other contexts."

And Bolick said there's a peculiar quirk in the federal law. Employers who do not purchase insurance for their workers are subject to a fine of $2,000 per employee -- but only in states that run their own exchanges. There is no similar provision for companies in states with federally operated exchanges. Don Hughes, the governor's health care adviser, said Brewer's decision to let the federal government run the insurance exchange does not mean the state will have no involvement.

"From the limited guidance that states have been given, we know that there is a role for the states," Hughes said. "What we're trying to find out exactly what is that role, what are our responsibilities under it and who's paying for what we may have to do."

Arizona already has used about $10 million in federal grants given to the state to help plan and set up an exchange. But there is still about another $20 million available to the state, even with opting not to run an exchange, to cover some of whatever costs still may remain.