Federal officials to run health insurance markets in half the states

Obama administration officials are getting ready to set up and operate new health insurance markets in about half the states, where local officials appear unwilling or unable to do so.

The markets, known as exchanges, are a centerpiece of President Obama's health care law, and running them will be a herculean task that federal officials never expected to perform.

When Congress passed legislation to expand coverage two years ago, Obama and lawmakers assumed that every state would set up its own exchange, a place where people could shop for insurance and get subsidies to help defray the cost.

But with Republicans in many states resisting the creation of exchanges or deterred by the complexity of the task, federal officials are preparing to do the job, with or without assistance from state officials.

Application due date looms

"We realize that not all states will be ready to establish these exchanges by 2014, so we are setting up a federally facilitated exchange in those states," said Michael Hash, the top federal insurance regulator. "We are on track to go live in October 2013."

Governors of 13 states with nearly one-third of the U.S. population have sent letters to the Obama administration saying they intend to set up exchanges. Complete applications are due Nov. 16, just 10 days after the election.

Federal and state officials and health policy experts expect that the federal government will run the exchanges in about half of the 50 states -- a huge undertaking. The federal exchanges will vary from state to state. The Obama administration will not define a single uniform set of "essential health benefits" that must be provided by all insurers, but will allow each state to specify the benefits within broad categories.

In running an exchange, federal officials face a delicate political task. They will encourage people to enroll, promoting the exchange as an important part of Obama's health care overhaul. But they do not want to feed fears of a federal takeover or alienate state officials whose help they need.

Much work will be done by contractors. With public opinion deeply divided over the new law, the Obama administration has invited advertising agencies to devise an elaborate "outreach and education campaign" to publicize the exchanges and their potential benefits.

Hash said the federal exchanges "will operate essentially in the same manner as the state-based exchanges." However, they differ in a significant way. States have done their work in public, but planning for the federal exchanges has been done almost entirely behind closed doors.
States as diverse as California, Minnesota, Mississippi and Nevada have websites where they post documents laying the groundwork for exchanges. By contrast, federal officials have disclosed little about their plans.

Lack of information

"We have gotten little bits of information here and there about how the federal exchange might operate," said Linda Sheppard, a senior official at the Kansas Insurance Department. "I was on a panel at Rockhurst University here, and I was asked, 'Where is the website for the federal exchange?' I chuckled. There really isn't any."

Some states are still weighing their options. The 2010 health care law says that if a state runs its own exchange, it must "consult with stakeholders," including consumers and small businesses. Subsequent rules require states to consult health care providers, insurers, agents and brokers.

The success of the exchanges depend on attracting large numbers of healthy people, whose premiums will help finance care for sick people. Republican criticism of the new law could make it more difficult for federal officials to achieve that goal.

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