PPACA's State Exchange Update: States Taking Different Directions

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Sentiments surrounding the state health insurance exchanges in legislatures across the country are, at best, mixed.  Pending the resolution of a host of legal challenges facing the Patient Protection and Affordable Care Act (PPACA), some states have elected simply not to initiate legislation to form a state health insurance exchange. These states, while rejecting federal grant funds to establish a state exchange, are opting instead to focus their time and energy on other pressing statewide issues. In fact, governors and other elected officials of these dissenting states are hoping for a verdict to overturn PPACA. They are attempting to balance the cost in time and effort to set up a program that may or may not survive legal review against the risk of a court verdict in favor of PPACA which could result in the establishment of a federally-run state exchange within their borders.

Florida is one state that has decided not to implement a state health insurance exchange. The governor and a majority of the state legislature are opposed to the installation of any aspect of PPACA into the state’s allotted resources.

Other states, such as Maryland, California, and Colorado are taking an active stance in the latest legislative sessions to pass bills in response to the upcoming federal standards mandated by PPACA. These states’ governments are predominantly under the control of the Democratic Party and share a similar perspective with their fellow party members at the federal level.

Recently, BenefitMall published an issue brief discussing the role of private and public exchanges (see https://www.benefitmall.com/PORTAL/Portals/0/BenefitMall%20Brief.pdf). In addition, BenefitMall posted a legislative alert that provides some helpful background on the exchange concept (See https://www.benefitmall.com/PORTAL/Portals/0/BenefitMall%20Brief.pdf). 

Active Purchaser versus All-Comers Models

Two states, Massachusetts and Utah, each have existing state exchanges that differ fundamentally. The Massachusetts exchange is considered an “active purchaser” model, has a large organization and a sizeable budget. The state’s model does not allow all licensed insurers to participate in the exchange. The Utah model, on the other hand, is an “all-comer” model that allows any licensed health insurer to participate. Utah’s exchange initiative is much smaller in scope with only two full-time employees and a limited budget. Currently, the Massachusetts state exchange is suffering major cost overruns.  Both models welcome the participation of brokers and general agents.


One state that is attempting to follow the Massachusetts model is California. This state has not only implemented legislation to establish and operate a state exchange, but has authorized the creation of a state government authority that supports committees to consider the implementation of a state health insurance exchange. The members of the authority were appointed by then-Governor Arnold Schwarzenegger and members of the state legislature. The activities of this authority to date are following the Massachusetts model.


Maryland has just passed legislation that would create a large-scale online health insurance exchange.  This public entity will be run by government officials, and will be officially established as a public corporation and an independent unit of State government. In the future, enabling this legislation suggests that the Maryland exchange system could grow so that an online portal could report on insurer information from multiple states, meaning that individuals would have access to a wider selection of coverage for themselves and/or their small businesses.


States such as Georgia are trying to follow the “all-comer” path taken by Utah. The Georgia state legislature is considering legislation that would create a statewide compact rather than a restrictive exchange. In fact, Governor Nathan Deal has just signed new legislation that would put forward a new compact for the state. The exchange would consist of an open-access marketplace where consumers could evaluate and buy insurance plans. Unlike other states, however, Georgia’s exchange would not have large amounts of time and money invested in the newly developed project.


After initially proposing a more comprehensive exchange model, Texas is also trying to pass legislation at the state House that mimics the Utah system. This legislation, SB 1586, brought to the Texas Senate floor by Republican Senator Steve Ogden, is a connector model by design (more similar to the Utah approach) and would be overseen by a seven-member board of directors. The aim of this proposal is to create an online portal, and would not restrict the insurance providers who entered the exchange. This exchange also would feature many of the same guidelines that were created by the PPACA.  Republican Rep. John Zerwas, a physician for over 20 years, had also previously brought similar legislation to the House floor for review. His vision is for Texas to create an exchange that is run by Texans before the federal government creates one for them. He is still in opposition to the federal legislation, yet is making an attempt to be practical and realistic in his thinking that new legislation might be implemented for an extended period of time. The governor and many members of the Texas House and Senate have voiced negative feedback toward both pieces of legislation. The governor has gone on the record as saying that he will not sign any bills that cross his desk regarding the establishment of a Texas health insurance exchange until the constitutionality of the PPACA is completely settled.

New York

Like many states, New York is just starting the process of implementing a health insurance exchange system. New York officials are currently seeking outside opinions and multiple perspectives on the issue before moving forward. Last week, Governor Andrew Cuomo’s administration created a forum to discuss the multiple facets and complexities involved with creating an exchange. The forum was comprised of 100 stakeholders invited by the administration. New York is still in the very early stages of the drafting and implementation process.

Next Steps

Clearly, there is a large divide across the nation regarding the establishment of state health insurance exchanges, just like there is a divide regarding views on the PPACA. Ultimately, these issues will not be settled until the PPACA court cases are settled. If the constitutionality of PPACA is upheld, then the states must decide which model to adopt. However, if the PPACA is determined to be unconstitutional, federal activities on state exchanges will be terminated. Some states such as California will probably continue with their activities, while others that have delayed exchange activities will likely not have state exchanges.

In the meantime, the states are taking many different directions in their respective thinking about how to set up and operate the exchanges. Stay tuned to BenefitMall for future updates on this subject. 

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