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July 27, 2012 2:10pm EDT  WASHINGTON (Reuters) — The Obama administration on Friday said it is on track to set up federal health insurance exchanges by 2014 in U.S. states that fail to establish their own regulated insurance markets as required by the U.S. health care reform law.

The U.S. Health and Human Services Department will issue new guidance before the end of the summer on how federally-facilitated exchanges are expected to operate, a senior official said.

The comments accompany concerns only a minority of states will be ready on time to move forward with one of the main thrusts of President Barack Obama's health care reforms.

The law known as the Patient Protection and Affordable Care Act calls on states to set up regulated exchanges where an estimated 16 million uninsured Americans are expected to qualify for private health coverage at rates subsidized according to income.

The provision has become an election year flashpoint between the administration and Republican governors who reject the exchange plan, along with a related expansion of the Medicaid program, as too costly and bureaucratic.

State resistance to exchanges, spearheaded by the governors of Florida, South Carolina, Louisiana, Mississippi and Texas, has been largely overshadowed up to now by the fight over the plan to extend Medicaid coverage to millions of people living near the poverty line.

A larger number of states have done little to establish exchanges because of political uncertainty over the November election, which could set the stage for a repeal of the reform law if voters give Republicans control of the White House and Congress.

"We realize that not all states will be ready to establish these exchanges by 2014, so we are on track to set up the federally facilitated exchange in those states. It is on track to go live," said Mike Hash, the HHS official, who is overseeing the administration's exchange effort.

Speaking at a Capitol Hill conference on health reform, Hash said the administration wants as many states as possible to set up their own exchanges but has begun testing a federal exchange model that can be rolled out "in any number of states".

Thirty-five states have accepted federal grants to plan for a state exchange. But only 13 and the District of Columbia have declared their intention to establish their own marketplaces.

According to the Commonwealth Fund, a private foundation that promotes health care system improvements, 24 states have taken no action toward establishing an exchange while eight others have declared that they will not pursue one.

The administration has set a November 16 deadline for states to say whether they intend to set up their own exchanges, create one in partnership with the federal government or let federal officials establish one for their residents.

Some experts believe fewer than 19 will be ready to go with state-run exchanges by the January 1, 2014, deadline for full operation.

(Editing by Andrew Hay)

© 2011 Thomson Reuters. Click for Restrictions.

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