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Arizona to let Federal Government set up healthcare insurance exchange

Howard Fischer Capitol Media Services

PHOENIX – The federal government, not Arizona, will run the insurance exchange required by the Affordable Care Act.

In a letter Wednesday to Health and Human Services Secretary Kathleen Sebelius, Gov. Jan Brewer said her administration had made “significant progress” in planning and designing the exchange. It would provide a marketplace for those who make too much to qualify for Medicaid but still meet certain income standards to buy subsidized health insurance.

But Brewer said the federal government has not provided detailed regulations on a timely basis for Arizona and other states to make informed decisions on whether to provide their own state-based exchanges. She also said there have been delays in telling states when required services will be made available.

Brewer is not alone in deciding to opt out and let the federal government run the program. More than a dozen other governors already have made such a choice.

The decision essentially means it will be the federal government that will set up an exchange in the state, which includes which insurers will be able to sell plans to Arizona residents.

The question of who runs the insurance exchange may have little impact on the average Arizonan. There is only limited flexibility for states to affect major issues like what medical conditions are and are not covered.

But it could be an early indication of her leanings on the other big decision she needs to make within the next two months about another key provision of the federal Affordable Care Act: whether to expand eligibility of the state’s Medicaid program.

Wednesday’s decision not to have a state-run exchange came despite lobbying by hospitals and some health insurers.

Pete Wertheim, vice president of the Arizona Hospital and Healthcare Association, said the question of who operates the exchange can make a big difference to health-care providers. Brewer’s move means the rules for the exchange will be decided by the federal Centers for Medicare and Medicaid Services in Washington rather than locally, he said.

“There are some unknowns still left with what a federally operated or administered exchange in a state will look like, areas like rules of participation, what types of insurance plans can join the exchange, offer products, pricing, governance,” Wertheim said. “There are a lot of issues that if you sort of forgo those at a state level, you’re sort of at the mercy of CMS to see what kind of rules they’re going to dictate that states will play by.”

Gubernatorial press aide Matthew Benson said Brewer normally prefers to have states in charge of programs, with the feds providing the money and only general guidance.

But in this case, he said, “there is no true local control under the Affordable Care Act. Whether we leave the exchange to the federal government or run it as a state, the reality is most of the decision making and authority would be left to the federal government.”

Benson said the governor, who already spent about $10 million in federal funds working to design a state-run exchange, did listen to the concerns of hospitals, insurance companies and patient advocacy groups. In the end, though, he said none of that alleviated her concerns.

Benson said Brewer also was worried that it would fall to the state to construct and operate the exchange. Opting out means the financial burden falls on Washington.

And equally important, Benson said, was the fact that the federal government continues to issue and alter the rules and guidelines for how states would operate their own exchanges.

Brewer’s decision may actually have been foretold.

The governor previously acknowledged she would need legislative approval to set up a state-run exchange. And key Republican lawmakers said they would fight such a move, saying the state should not cooperate in any way with the Obama administration to implement the program.

Brewer’s decision does not take the state out of the picture entirely.

“We are working with (the federal agency) to determine what exactly that role is and what our responsibilities are and how those costs will be paid for,” Benson said.

Benson said Wednesday’s action should not be seen as a precursor of another – and more sweeping – decision Brewer has to make within the next two months: expansion of the state’s Medicaid program.

As originally approved, the federal law said anyone earning up to 133 percent of the federal poverty level would be eligible. That currently computes out to about $25,450 a year for a family of three.

Arizona law provides coverage for those up to the poverty level for all but single adults.

While the federal law said states had to comply or lose all of their federal Medicaid funds, the U.S. Supreme Court struck down the provision forcing states to enroll more people.

That leaves it up to individual states to decide whether to go along voluntarily, with the promise of additional federal funds to cover the expanded enrollment.

One big concern is how long those extra federal dollars will be available as Washington seeks to trim its own deficits. That could leave Arizona with a much larger program, putting lawmakers into the politically tricky position of either absorbing the additional costs or having to tell people they are no longer eligible for care.