Health Care Reform: States Risk Losing Millions in Fed Money by Delaying Exchanges

New York is one of three states that has received millions of dollars in federal grants to start setting up a one-stop shop, as required under the health care reform law, for individuals and small businesses to buy and compare health insurance.

The Empire State has received three types of grants totaling $39 million for its health insurance exchange, where coverage plans can be purchased. The federal money will go toward planning, support research efforts, expand consumer assistance, and design and implement information technology infrastructure, like enrollment and eligibility systems.

While New York is ahead of the game compared to other states, there's a much larger sum of federal money out of its reach because of lawmakers' failure to pass legislation establishing legal authority for an exchange -- one of several steps that must be taken to tap into this grant money.

This money is officially called Level Two Establishment grants. Other requirements include a governance structure, a budget, a blueprint for fraud prevention measures and a consumer assistance plan. New York has already received $10.8 million from the first level of planning grants.

Elisabeth Benjamin, vice president of health initiatives at the Community Service Society of New York, called this grant money unavailable to the state the big enchilada, pegging the amount at stake for New York as high as $100 million.

Only 12 states have created the legal authority for an exchange to comply with the Affordable Care Act.

Massachusetts and Utah already had exchanges in place before the health care reform law was signed in 2010. Five states passed laws to produce feasibility studies.

Rhode Island, which created a state exchange through an executive order, is already applying for Level Two funding. The Ocean State Oct. 11 requested $74.5 million--the first state to do so, according to the law firm McKenna Long & Aldridge, which is tracking state implementation of the Affordable Care Act.

There's a June 29 deadline to apply for these Level Two funds. There's also a 2013 deadline for states to have their exchanges operational and certified by the federal government.

That's not a lot of time. It's a massive enterprise that needs to be started up, Benjamin told the International Business Times, regarding New York. You're setting up a small agency, essentially.

States Hesitant to Support Obamacare

The federal government says the exchanges will drive down costs through increased competition between private insurance companies.

States--for political reasons or waiting for the U.S. Supreme Court to strike down health care reform -- have been slow to create them. There are 29 states that have failed to pass the necessary legal authority.

Republicans who are strongly opposed the Affordable Care Act have also been a barrier to building exchanges, a process that has become a partisan battle in certain states.

New York State Sen. Greg Ball, a Republican who represents parts of the Hudson Valley region, said in a June statement that Obamacare needed to be repealed instead of implemented.

Creating an exchange will only create more costs and future unfunded mandates, that which the state cannot afford, he said.

In New Mexico, a bill was able to get to the desk of first-term Republican Gov. Susan Martinez, but she vetoed the legislation in April, citing a lack of federal rules and regulations for states to follow, the Santa Fe New Mexican reported.

In Nebraska Gov. Dave Heineman, a Republican, wants to pass on creating an exchange until the Supreme Court decides health care reform's fate, a decision expected to be reached in June 2012, according to the Omaha World-Herald.

If the Supreme Court upholds the law, Heineman suggested Monday that there could be a new Republican order in Washington come 2012, which would make the issue moot, the paper reported.

Like New York, these states and others have received federal money through an Early Innovation grant for designing information technology infrastructure, a Planning and Establishing grant, or a Level One Establishment grant.

Other states, such as Florida and Oklahoma, returned tens of millions of federal dollars in Affordable Care Act grants.

Deadline Approaching

Rebuffing the Affordable Care Act, however, doesn't mean that elected officials can rid their state of the health care reform law. The federal government will step in to create an exchange.

That might put a fire underneath health care reform opponents to get a state-run exchange operating. But the longer they wait, the more difficult the compliance process will be, Brett Graham of Leavitt Partners, a consulting firm, told IBTimes.

This is one of those things where if you're game plan isn't set, time's going to run out... 2013 has to be an implementation year, Graham said. It cannot be a decision year.

This is because of the complex nature of a state-run exchange. The process consists of collecting data, hiring staff, setting procurement procedures, drafting exchange bylaws and creating governance system, just to name a few things that go into creating such a health insurance system.

Graham said that there is a limited pool of private vendors, such as IT companies, that can assist a state form an exchange.

It just further compresses the whole timing around this, he added. It's not like we have a lot of available experts who understand these systems sitting out there waiting to be called.