“A state cannot establish an exchange by snapping its fingers,” Jost said in an interview. “Establishing a state exchange takes time, and will probably, in most states, take legislative action.”
The court ruling is causing great anxiety among state officials around the country because it could mean the loss of subsidies worth $36 billion to 7.3 million individuals in 2016, according to the Urban Institute. Experts have suggested that some states—particularly the seven that currently have federal partnership exchanges—may be able to easily fulfill the requirements to meet the definition of a state-based exchange to ensure that they can continue accessing subsidies.
Some state officials in the seven states with partnership exchanges argue the exchange in their state should be considered a state-established exchange because the state carries out some of the marketplace functions.
In addition, two states, Idaho and New Mexico, intended to set up their own exchanges but ended up offering “federally supported state-based” exchanges. And since the Halbig ruling, Nevada and Oregon, which had established their own exchanges and now are turning to the feds to operate their websites, have stated they are state-based exchanges. Idaho officials have issued a similar statement.
Other states also are scrambling to define their exchanges as state-run marketplaces shielded from the Halbig ruling. "We are administering a marketplace," Rita Landgraf, Health and Social Services Secretary for Delaware, which has a partnership arrangement, told the Wall Street Journal. "We happen to use the IT that the federal government has set up, because we got a better economy of scale."
The head of Arkansas' federal partnership exchange said her state “is well on its way to establishing a state-based exchange.”
Attorney Mark Rust, chair of Barnes & Thornburg's healthcare practice in Chicago, told Modern Healthcare that the seven states such as Illinois with partnership exchanges already may meet the standard for having a state-established exchange. Other states could fairly easily convert to this hybrid model, he added.
But after a close reading of various sections of the ACA and of HHS regulations, Jost wrote it's not going to be that easy. To “establish” its own exchange, a state must:
- Enact authorizing legislation or a have a properly issued executive order establishing the exchange;
- Establish a properly constituted governing board;
- Issue governing principles;
- Fulfill all exchange functions directly or through contracting with a private entity or under arrangement with HHS;
- Provide funding for the exchange, which must be self-sufficient for 2015.
Here's the kicker. “It is not enough for a state simply to set up a website,” he wrote. “It is also not sufficient if a state department of insurance operates some functions in a partnership relationship with a federal exchange.”
So, the hard political work still must be done to establish a state-run exchange.
Follow Harris Meyer on Twitter: @MHHmeyer