More than half of the state exchanges to be created under the 2010 U.S. health care overhaul are expected to be run by the federal government, offering insurers and consumers uniform criteria in at least those areas.

According to The Hill,  33 states "have chosen to either not implement a state exchange at all or engage in a hybrid system that leaves many of the problems up to the federal government, as is the case with Illinois, Delaware and North Carolina, or which remain undecided on whether to accept the responsibility for developing the exchange."

Many states led by Republican governors have already said they won’t build their own insurance exchanges. That puts the onus on the Obama administration to successfully set up and maintain the marketplaces that are at the heart of the Affordable Care Act’s mandate to expand medical coverage to as many as 30 million people.

Six states with Democratic governors whose exchange plans were approved last week have split down the middle on whether they’ll force insurers to compete for access, based on pricing and products, or leave it open to all comers who meet minimal standards. U.S. health officials have said their exchanges will not force companies to compete.

“This enables the federal government to ensure there’s some level of consistency nationally,” said Dan Mendelson, chief executive officer of Washington-based consultant Avalere Health. “From that perspective, they see that as a positive.”

Aiding consumers

Under the law, the exchanges are designed to allow consumers who don’t have medical coverage through their jobs to easily compare health plans, and then buy coverage online and through telephone services, beginning in 2014. The U.S. is subsidizing the cost for those who can’t afford coverage.

While federal exchanges would create a standard for the exchanges in states ranging from New Jersey to Nebraska with widely different demographics, they will also face initial budget constraints that aren’t an issue for states building their own marketplaces.

Funding for states to build their own exchanges is essentially unlimited, and the U.S. has given $1.8 billion so far, including to some states that have said they won’t complete the work, Gary Cohen, who directs the U.S. Center for Consumer Information and Insurance Oversight, said in prepared remarks for a congressional hearing on the issue yesterday.

Money for the federal exchange is in shorter supply, coming mostly from a $1 billion appropriation made by the 2010 health law.

Exchange cost

Cohen’s agency awarded a $93.7 million contract to CGI Group Inc.  in September 2011 to build the federal exchange, Bloomberg Government reported. Quality Software Services Inc., a unit of UnitedHealth Group Inc., the largest U.S. insurer, has a $69 million contract to build a system that states and the federal exchange will use to verify customers’ eligibility for insurance subsidies.

The Obama administration appears on schedule to meet the Oct. 1 deadline for federal exchanges, Aveler’s Mendelson said in a telephone interview.

“The exchanges are a major legacy item for the president and he is not going to let up on that,” he said. “The administration will find the resources to get done the things they need to get done.”

Developing rules

Insurance companies have, in the past, encouraged states to build the exchanges, partly because “it enables a nice level of communication” with the people who run them, Mendelson said. “If you’re operating the Blue Cross Blue Shield company in that state you also get a close familiarity with all the legislators who are setting the rules.”

Rules for the federal exchange aren’t yet final. So far, insurers are supportive of the rules that won’t force companies to compete on price, said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, an industry lobbying group.

“We think that should be permanent,” Zirkelbach said in a telephone interview. “That encourages more plans to participate.”

Congressional budget projections show that more than half of the 30 million uninsured targeted by the Affordable Care Act will eventually buy subsidized plans through the exchanges and 11 million will become eligible for Medicaid, the state-federal insurance program for the poor.

The next step for the U.S. is to certify by Jan. 1 that states that have said they will build their own exchanges will be able to meet an Oct. 1 deadline to begin enrolling people into coverage.

To contact the reporter on this story: Alex Wayne in Washington at

To contact the editor responsible for this story: Reg Gale at



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