If Mandate Survives SCOTUS, Will GOP States Be Caught Flat-Footed on Exchanges?

I keynoted the Opal Events Medicare Executive Forum last week and stated there — as I have here — that I think there’s slightly more than an even chance that SCOTUS will overturn the individual mandate in its ACA ruling later this month.  The presentation raised an interesting question: if the mandate survives the Court, will the 26 GOP governors who filed suit be caught flat-footed on exchanges, and have a Federal fallback exchange jammed down their throats in 2014 for their inaction?  Remember that the states must demonstrate to HHS this fall that they’ll be ready to launch their exchanges by January 1, 2014, and that there are dozens of states waiting to see what the Court will decide before taking any action.  Politico held a policy briefing Friday with a couple influential state regulators that argued at least a few of those red states are moving forward on exchanges.

The most heartening news for ACA supporters were remarks by Bill Hazel, Virginia’s secretary of health and human resources. Virginia is in the vanguard of states opposing the law but nonetheless has been busy getting ready to open an exchange if the court doesn’t strike down the measure.”We’ve done a lot of the planning,” he said, adding that Virginia is in the “weird position” of being in relatively good shape to launch its exchange while opposing the law. “Virginia’s done it and we don’t want to,” he said.

One of the most difficult things for states to pull together even if they are enthusiastic about exchanges is the information technology required. “We are one of the handful of states that could probably pull the IT piece off” if the Court upholds the law, Hazel said.  Hazel added that he thinks it’s a mistake for states opposed to the law to sit idle and watch the federal government struggle to open exchanges to fill the gap.  Amen to that. “There is a group of individuals who believe that the states should just stop all work now, default into a federal plan, and assume that the feds can’t get it
done,” Hazel said. “That’s not a bet that I would recommend yet that the Governor take because there’s been a tremendous amount of work at the federal level.”

Ron Pollack, executive director of Families USA, a pro-ACA consumer group, also called Virginia an “important lesson” and added that states opposed to the law may be doing more to get ready for exchanges than many realize. The narrative in press coverage is that only a few more than a dozen states will be ready to open exchanges by 2014, an assessment he said is based on the relatively small number of states that have passed laws to open the marketplaces.  But, he said, a more telling sign of readiness is the number of states that have gotten the first round of grants to set up exchanges: 34, according to Pollack.

“Behind the scenes there is work being done to set up exchanges,” he said. Pollack added that it makes a significant difference that the federal government is willing to share in the work of opening state exchanges by entering into
partnership arrangements.  Both Pollack and Joshua Sharfstein, Maryland’s secretary of Health and Mental Hygiene, struck an upbeat tone when talking about the health law in sharp contrast to the mostly gloomy talk of late about implementation struggles. Sharfstein downplayed the difficulty of opening an exchange.

It appears — initially at least — that the Maryland and Virginia exchanges would not be markedly different, assuming the health law survives and they both open. Left-leaning states are thought to be more likely to drive a hard bargain with insurers by excluding those that don’t offer relatively low rates. But Sharfstein says that’s not in the cards right now at least; Maryland officials first want to get their exchange up and running for a while before they think about becoming an “active purchaser.”

One state out of 26 doesn’t make a trend but the hope is that Pollack is right and that 34 planning grants will be enough to break through GOP gubernatorial intransigence on exchanges.  The clock is ticking, almost no matter what happens in the SCOTUS ruling this month.