Republican Gov. Bill Haslam says Tennessee could design its own health insurance exchange required under Democratic President Barack Obama's healthcare law, but resistance in the GOP-controlled General Assembly may cause the state to hand that power off to the federal government.
States have until Friday to inform the U.S. Department of Health and Human Services if they plan to set up their own health insurance markets, and Haslam's decision could come down to the wire.
The governor opposes the new healthcare law but said he can see reasons for not deferring the exchange to federal government.
"There are a lot of benefits to the state running it ourselves, because we're going to run anything better than the federal government," he said.
But Haslam also acknowledged that it would be tough to get the Republican-controlled Legislature to approve a state exchange.
"Politically, it will be difficult," he said. "As somebody who's always said that closer-to-home government is the better, that's why I probably lean toward doing it."
Because some states like Tennessee were lagging on this issue, the federal government gave them until December to submit the details on a state-run exchange.
House Majority Leader Gerald McCormick, R-Chattanooga, said there isn't much interest among Republicans to take ownership of a key element of Obama's healthcare law. The GOP gained supermajorities in both chambers of the General Assembly last week.
"We'd be more likely to throw it back to the federal government to have them clean up their own mess," McCormick said.
"This thing is going to be a headache for a lot of people in my opinion, and my question is whether I as a state representative want to take a beating on that when I didn't agree with setting the whole program up in the first place."
House Democratic Caucus Chairman Mike Turner of Nashville said his preference would be for the state to run the exchange, but he fears one created by the Republican-dominated Legislature would seek to undermine the Obama plan.
"I think what they'll try to do is skin it down as much as they can," he said, adding that the state mismanaging such a program would be worse than the federal government running it.
Open enrollment for exchange plans is scheduled to start next October, and coverage will be effective Jan. 1, 2014.
Former U.S. Sen. Bill Frist, R-Tenn., has spoken in favor of states creating their own exchanges, noting that was originally a Republican idea.
Frist said in a July column in The Week magazine that the exchanges are "perhaps the most innovative, market-driven, and ultimately constructive part of the law."
Unlike a Medicaid expansion, he said, "the exchanges should facilitate competition among private insurers as they design new benefit packages and cut prices to stay ahead of the game."
Republicans are quick to cite as a cautionary tale the experience of TennCare, the state's expanded Medicaid program that was beset by out-of-control costs until former Democratic Gov. Phil Bredesen in 2005 decided to make deep cuts to both enrollment and benefits.
Haslam said he is still awaiting details about the federal requirement for an exchange before determining his preferred path. The Centers for Medicare and Medicaid Services have been slow to respond to specific questions, he said, though he expected more comprehensive answers now that the presidential election has been decided.
The governor added that "the arguments haven't been made yet" with state lawmakers about which course to pursue.
A state-controlled exchange might allow for stricter controls on eligibility and could have different tax implications for businesses, the governor said.
"And the insurance companies and others have made it clear that (they) would rather deal with the state than with the federal government," he said.
He said one area of confusion is a mistaken impression that creating a state exchange would be linked to an expansion of Medicaid, which is permitted but not required under the new law.
Haslam said that separate decision on whether to boost Medicaid coverage will also be a tough one, given that hospitals — especially those in rural areas — rely heavily on federal reimbursements for care.
House Speaker Beth Harwell, R-Nashville, said her first reaction is that she is not in favor of an expansion of Medicaid, but she also understands the potential impact for hospitals.
"It's going to be a very difficult decision on the part of our state," she said. "But hopefully we will make one that reflects the will of Tennesseans."