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Regulation and Compliance > State Regulation

Who will start a PPACA exchange?

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The U.S. Department of Health and Human Services (HHS) is starting to get a clearer picture of which states will start their own health insurance exchanges, which will share the job with HHS, and which will do all they can to shun the concept.

Today — November 16 — was supposed to be the deadline for states to submit declarations of their intent to start their own, mostly independent, state-based exchanges.

HHS Secretary Kathleen Sebelius has written to the Republican Governors Association (RGA) that HHS will, in fact, give states until December 14 to send in a declaration of intent.

Earlier this week, HHS said states could get the declaration of intent to HHS by this Friday but take another month to submit a formal exchange program blueprint.

States also have the option of working with HHS to share responsibility for setting up and running an exchange program, or giving HHS full responsibility for providing exchange services for their residents. States will have until February 15, 2013, to apply to work with HHS to run exchanges, Sebelius told RGA leaders in a letter posted on the website of, an affiliate of the National Academy for State Health Policy.

Washington watchers have been trying to count and classify the exchange notices.

Reporters at The Hill say they have found that 17 states and the District of Columbia want to set up state-based exchanges, five want to set up “partnership” exchanges, and 20 are rejecting the idea of starting exchanges.

Reporters at The Associated Press have counted 17 organizers of state-based exchanges, five organizers of partnership exchanges, and 13 states that will clearly let HHS provide exchange services in their states.

Although many states with Republican governors have decided against setting up exchanges, some states with Republican governors, such as Mississippi and New Mexico, are hoping to set up exchange programs.

The Patient Protection and Affordable Care Act of 2010 (PPACA) calls for states to set up the exchanges, or Web-based health insurance supermarkets, to help individuals and small groups use new federal tax subsidies to buy high-quality, standardized packages of health coverage.

Governors who have rejected the idea of setting up exchange programs have used different types of language to describe and explain their decisions. has posted many of the notice letters on its site.

Texas Gov. Rick Perry, R, sent a short, curt note rejecting the exchange program option.

“I stand proudly with the growing chorus of governors who reject the PPACA power grab,” Perry said in his letter. “Thank God and our nation’s founders that we have the right to do so.”

HHS has said it will let states take a wide variety of approaches to setting up exchanges.

Wisconsin Gov. Scott Walker, R, said the HHS options don’t give Wisconsin much real flexibility.

“No matter which option is chosen, Wisconsin taxpayers will not have meaningful control over the health care policies and services sold to Wisconsin residents,” Walker said.

Some other governors talked at more length with  their concerns about HHS implementation of PPACA.

In South Carolina, committees looked at the exchange program and decided that state “state ‘participation’ was in name only…” according to South Carolina Gov. Nikki Haley, R. ”The law’s state-based exchange programs are not state-based at all. Instead, they simply pass along to the state the burdens of a new and cumbersome bureaucracy.”

Many of the regulations needed to implement the exchanges are still incomplete, and Joel Ario, the former head of the exchange program, has questioned whether HHS can have the systems needed in place to run the exchanges in time to meet PPACA deadlines, Haley said.

But Haley emphasized that South Carolina will cooperate with federal efforts to make the federal exchange work as well as possible, such as efforts to help the federal exchange system hook up to South Carolina’s Medicaid program, Haley said.

Nebraska Gov. Dave Heineman, R, told Sebelius that agencies in his state have estimated that running a state-based exchange for Nebraska would cost about $646 million, while letting HHS do the job would cost just $176 million.

Some governors are citing the characteristics of their state health insurance markets as reasons to turn the exchange job over to HHS. In Alaska, for example, officials are saying they believe the state is too small to run an exchange in a cost-effective fashion.

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