GOP Govs Move To Establish Health Insurance Exchanges

A small but growing number of prominent, Republican governors — including Mitch Daniels and Haley Barbour — are taking the lead to shape a key component of the health care overhaul their party fought so hard to kill.

It’s a delicate balancing act for Republicans who, on the one hand, oppose federal health reform, even challenging its constitutionality in federal court, and, on the other hand, are pragmatically trying to control as much of the implementation process as they can.

In Indiana, Gov. Mitch Daniels issued an executive order that allowed the state to become one of just three to receive a multimillion dollar grant to establish a health exchange, the online insurance marketplaces that all states must eventually have if the reform law stands up in court.

Wisconsin, under the leadership of Gov. Scott Walker, is one of six states to win an Early Innovator grant. While the grant was received under Walker’s predecessor, Gov. Jim Doyle, Walker has continued to use the resource, setting up the Office of Free Market Health Care that has prominently advertised its innovator status.

And in a weird twist of politics in Mississippi, state agencies of Gov. Haley Barbour have relied on little-used statutory authorities to set up an exchange, reviving a Democratic-sponsored effort to do so through the Mississippi State Legislature.

Daniels, Walker and Barbour are a stark contrast to Republican governors who are more stridently opposed to all aspects of health reform. Govs. Rick Scott of Florida, Bobby Jindal of Louisiana, and Susana Martinez of New Mexico have come out in fierce opposition of any kind of implementation.

Scott and Jindal have also shunned federal money to plan their exchanges.

“The Rick Scotts of the world are probably going to be in the minority,” says one Republican health policy source, referring to the Florida governor’s halting health reform implementation. “The ones that block it fundamentally have a disagreement or it fits into a broader political calculus.”

Many strategists in D.C. contend that setting up the exchanges undermines Republicans’ constitutional challenges to the health reform law.

But having a handful of prominent Republican governors move forward on the issue — two of whom weighed presidential runs — suggests that the exchanges could emerge as one of the more palatable provisions of the contentious law.

And still other Republican governors, with smaller national profiles, have also endorsed implementing state-run health exchanges.They include Nevada’s Brian Sandoval, who is backing an exchange implementation bill in the Nevada State Legislature, Georgia’s Nathan Deal and Virginia’s Bob McDonnell.

“The big picture is that, while there’s an ideological divide, many governors see the exchange as an empty vessel they can shape in their own image,” says Ian Morrison, an independent health policy consultant in California. “Republican governors like the idea of more commercial insurance.”

Another crucial factor at play: If states don’t set up their own exchanges by 2014, the federal government will come in and do it for them.

“If they play hardball and don’t do anything, they get the federal government to come in,” says Morrison. “You can’t just pull an exchange out of your hat at the last minute.”

Perhaps the most striking endorsement of a health exchange has come from Barbour, who has supported a roundabout effort to build a health exchange. After Democrats in the Mississippi House of Representatives saw an exchange bill die in conference with the Republican-controlled Senate, Barbour has supported his insurance commissioner’s effort to set up a health exchange via the state’s high-risk insurance pool.

“Commissioner [Mike] Chaney and the governor have discussed what constitutes the best exchange for Mississippi,” Barbour spokeswoman Laura Hipp tells POLITICO. “They both agree that a voluntary market-driven exchange for small businesses and individuals that allows consumers the flexibility to choose the insurance plan that best fits their needs is best for Mississippians. The state plans to move forward with this type of exchange.”

The state is now preparing an application for an exchange establishment grant, due at the end of June that will allow them to move the planning process forward. “The governor has been in support of an exchange,” says Aaron Sisk, a staff attorney with the Mississippi Department of Insurance. “We’re trying to fulfill his vision developing a market driven exchange.”

Wisconsin’s Gov. Walker, who drew fierce criticism earlier this year for his collective bargaining legislation, continues to move forward on enacting health exchange legislation.

He opened the Office of Free Market Health Care that, on its home page, describes the state’s $38 million Early Innovator Grant as “a highly competitive grant that … rewards States that demonstrate leadership in developing cutting-edge and cost-effective, consumer-based technologies.”

Wisconsin Insurance Commissioner Ted Nickel told POLITICO at the most recent National Association of Insurance Commissioners meeting that the state has every intention of running its own exchange.

Indiana’s Daniels issued an executive order back in January, ordering the formation of the Indiana Insurance Market to “be formed as an Indiana nonprofit corporation to serve as the Indiana health benefit exchange pursuant to PPACA.”

That laid the groundwork for Indiana to become one of the first three states — alongside Democratic-helmed Washington and Rhode Island — to receive a $6.8 million exchange establishment grant. While the grant does not commit the state to running an exchange, it does give them more extensive resources to plan for the possibility.

“Since the passage of the ACA, the State of Indiana has actively worked to assess the impact of the ACA and to assure the State is prepared for implementation,” the state wrote in its establishment grant application, obtained by POLITICO, adding that “Indiana must be prepared to implement the ACA in order to protect and prepare Hoosiers if the courts uphold this law and it is not otherwise repealed.”

Indiana will use its new grant, according to its application, to plan for the potential exchange’s IT system as well as its business plan, while still keeping an eye on the possibility of participating in the federal exchange.
Unlike Barbour and Walker, the Daniels administration has not committed to running a health exchange and is still weighing the possibility of having HHS run its marketplace.

“We haven’t committed to establishing an exchange,” says Seema Verma of the Indiana Department of Family Services. “We’re using this to move the ball forward and be ready for the possibility of an exchange.”