States Face Critical Health Reform Deadline

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States must decide whether they will create their own insurance exchanges.

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States across the country face an impending Friday deadline on whether they will take charge of implementing a major part of health care reform.

By the end of the workweek, states need to declare whether they will establish their own insurance exchanges under the Patient Protection and Affordable Care Act (ACA), according to a letter sent by the Department of Health and Human Services (HHS) Secretary Kathleen Sebelius to all state governors last week.

While states must declare their intentions by this Friday, Sebelius extended the deadline for states to submit a “blueprint” of the technical aspects of their exchanges until December 14, 2012, in response to the states’ claims of needing more time. The original deadline for both actions – declaring intentions and providing design blueprints – had been November 16.

Designed as a centerpiece for insurance expansion and cost control under the ACA, insurance exchanges will be online marketplaces for individuals and businesses to purchase health insurance. If states opt out of building their own customized exchanges, then the federal government will build one for them. As of last Friday, nearly a third of states were reportedly still studying their options, while six states did not seem to have had any “significant activity” on the decision.

Under the timeline set by the ACA, insurance exchanges will open on January 1, 2014, the same date that the individual mandate requirement, as upheld by the Supreme Court this summer, takes effect.  Qualifying individuals and families – with incomes between one hundred and four hundred percent of the federal poverty level – will be eligible to receive federal subsidies for their health insurance, but they would have to use these subsidies to purchase health insurance through an insurance exchange.

States also face potential logistical difficulties in setting up exchanges. Not only do states have to pull together the technical details of an exchange by December, but they will also need to prepare a political and legal framework to establish the exchange to run starting 2014.