What does it mean for a state to establish an exchange?

I have no idea how the King/Halbig litigation will conclude. If a state wants to ensure that tax credits to purchase private insurance can flow to their citizens, they don’t need to wait for the case. They simply need to establish a state exchange as specified in section 1311 of the ACA to render the litigation moot.

  • Sec 1311(d)(1) of the ACA says in full

(1) IN GENERAL.—An Exchange shall be a governmental
agency or nonprofit entity that is established by a State.

  • This raises the question of what does it mean to establish an exchange? Following are some policy thoughts (meaning I am not a lawyer but can read the law, the guidance and what states have actually done so far).
  • I wouldn’t be surprised to see further rulemaking focused around what it means to establish a state exchange. However, a state doesn’t need to wait for that either to establish an exchange.
  • This link provides the blueprint and application for a state to establish an exchange. Highlights of my read through this document below:
    • A key part of creating a state exchange is to declare that a state is doing so in letter of declaration (see pp. 6-8) from the Governor (states also must declare they are creating a Partnership exchange, and are requested to say they will use a federal exchange). There are a series of choices states must make regardless of whether they are creating a state exchange, a partnership exchange, or intend to use the federal exchange (FFE). This creates policy overlap in the sense that a state could actually be doing more tasks via a federal exchange than under a state one and vice, versa, based on the choice(s) of the state.
    • There is some variation in the language used in the declaration letter of states who have a state-based exchange [link to all state letters re exchanges]. Most states use the word establish in their declaration letter; for example, Connecticut’s declaration letter has the following phrase “The Connecticut Health Insurance Exchange was established in 2011 by the Connecticut General Assembly”… However, all don’t. Colorado’s declaration letter uses the phrase “creating” and exchange and notes that this decision has been “codified” in Colorado law (see first para in link).  By my read, 13 states say clearly we are establishing an exchange in the declaration letter (CA, CT, HI, ID, MD, NV, NM, NY, OR, VT, WA) while others use words like “create”, “develop and operate” or “run” (CO, DC, MA, MN, RI).
    • Most Governors who filed a notice of establishing (or creating or running) a state-based exchange refer to the passage of a state statute as enabling this. The guidance anticipates non-legislative approvals, and asks for documentation including legal opinions from a Governor’s counsel and the State Attorney General if establishment authority did not come via a statute (see page 19, 1.0 and 1.1; right column).
    • There is a great deal of policy overlap between state-based and FFE exchanges, including partnership models because of the choices available to states regarding what functions will be retained by the state and which ones will be done by the federal government (at the choice of the state;  pp. 2-5 outline the various choices viz: reinsurance, risk adjustment, approving plans, consumer communication, etc). I’d love to a see a Venn diagram by type of exchange and functions being done by: state govt; federal govt; other contractors….but I don’t have the energy to do it.
    • For states not electing a state-based exchange, they must identify the individual(s) who are responsible for working with the federal government in implementing either a partnership, or FFE. I suspect some states will say this act established the exchange for the purposes of tax credits flowing to their residents. This also might be the source of a new rule making round.

As the WSJ noted on Friday, some states are moving to clarify their status per the litigation by saying what they have done has already “established” an exchange. I suspect others will simply write to the Secretary of HHS and say specifically that for the purposes of ensuring that tax credits flow to their residents, they are establishing an exchange while contracting out some tasks to the federal government. Rendering the case moot shouldn’t be too hard for states wanting to do so. The real question is in how many States do the elected officials not want to do so?

About Don Taylor
Professor of Public Policy (with appointments in Business, Nursing, Community and Family Medicine, and the Duke Clinical Research Institute), and Chair of the Academic Council at Duke University https://academiccouncil.duke.edu/ . I am one of the founding faculty of the Margolis Center for Health Policy. My research focuses on improving care for persons who are dying, and I am co-PI of a CMMI award in Community Based Palliative Care. I teach both undergrads and grad students at Duke. On twitter @donaldhtaylorjr

One Response to What does it mean for a state to establish an exchange?

  1. Pingback: Could North Carolina circumvent King v Burwell? | freeforall

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