HHS Is Giving Reluctant States A ‘Second Chance’ To Setup Exchanges, Avoid Federal Intervention

In a sure sign that the federal government doesn’t have the funds necessary to implement exchanges on behalf of states that opt out of building their own, the Department of Health and Human Services is actively lobbying reluctant governors and legislators to accept a “second chance” for avoiding federal intervention:

U.S. Department of Health and Human Services officials told Montana legislators Tuesday that the agency is working on a new partnership model to let state agencies help run the exchange — perhaps without the need for legislative authorization.

Marguerite Salazar, a regional director of the Department of Health and Human Services, said the proposal for the partnership is new within the past two months. State agencies are being invited to Washington D.C. next month to discuss it. “I think it is going to be the option for states that are nervous about a full-fledged exchange,” she said in an interview.

Montana is one of many states that have so far refused to pass a law authorizing a state-level insurance exchange, paid for by the federal government. Like some other states, Montana’s legislature does not likely meet again soon enough to authorize an exchange prior to the January 2014 implementation.

Indeed, some states may be receptive to the “partnership.” Inside Health Policy (subscription only) reports that the National Conference of State Legislatures has adopted a policy that pushes the idea that “a state should be able to choose which exchange functions can be turned over to the federal government to carry out and pay for.” HHS should “work with states to determine which exchange functions might most appropriately be developed and, at a state’s request, administered by the federal government rather than by the 50 individual states and territories,” their policy says. Consumer advocates, however, have expressed some concern about the model, arguing that the relationship could allow states to opt out of establishing critical regulations and leave the federal government in charge of governing essential elements of the new marketplace.

HHS has already gone out of its way to maximize flexibility, allowing for conditional approval of a state’s exchange if there is evidence it will be operational by the beginning of 2014.