LINCOLN — Issues of money and control persuaded Gov. Dave Heineman to let the federal government create a health insurance exchange for Nebraska.
The governor announced Thursday that he had decided against having the state operate its own exchange.
He sent a letter to that effect to U.S. Secretary of Health and Human Services Kathleen Sebelius, one day before the deadline for states to declare their intentions on exchanges.
The decision largely came down to money, with Heineman saying a state exchange would cost Nebraska taxpayers $470 million more over eight years than a federal exchange.
His other key concern was the amount of flexibility allowed state-run exchanges by the federal government.
“The bottom line is, a state insurance exchange is really controlled by the federal government, and the cost of operating a state insurance exchange is very expensive,” Heineman said.
Whether the state or federal government runs the exchange, all citizens will have the option to purchase private insurance policies through the exchange.
The exchange is to be a one-stop shop, where people can compare and buy private health insurance, get federal subsidies to afford the premiums or enroll in Medicaid if they are eligible.
Under the federal law, states can operate their own exchanges, partner with the federal government on operations or leave the job entirely up to the federal government.
Heineman made clear he is not interested in a partnership, saying such exchanges would be federally controlled.
But he also refused to join those still looking for ways to block the controversial federal law, even dropping his former habit of referring to the law as Obamacare.
“We are very pragmatic at this stage,” Heineman said. “The election’s over.
“How do you implement the Affordable Care Act?” he asked. “Because it’s going to be the law of the land. And so we’re trying to do what we thought was best for the state of Nebraska.”
Response to the governor’s announcement ranged from grudging acceptance to applause.
State Sen. Jeremy Nordquist of Omaha, who has worked extensively on the issue, expressed disappointment at the decision. He said the governor had “ceded power to federal bureaucrats.”
While state lawmakers could pass legislation creating a state exchange, Nordquist said the timing would make it difficult to overturn the governor’s decision. Exchanges are to be ready to enroll customers by Oct. 1.
Sen. Kathy Campbell of Lincoln, who leads the Legislature’s Health and Human Services Committee, said she liked the partnership idea and hopes there will be a way yet for Nebraskans to have a voice in what is created.
Sen. Mike Gloor of Grand Island, a member of the Banking, Commerce and Insurance Committee, said it was good to have the decision made and the suspense over.
Insurance companies, health care providers and many consumer groups had lobbied strongly for a state-run exchange.
But Bruce Reiker, vice president of the Nebraska Hospital Association, said he respects the work the governor has done and expects hospitals to turn now to working with federal officials to make the new exchange as responsive as possible.
Rebecca Gould of the Appleseed Center for Law in the Public Interest said the biggest concern, no matter who operates the exchange, is that it is accountable to customers and focused on their access to coverage, and provides true value for customers’ premium dollars.
The political group Americans for Prosperity-Nebraska, which opposed the health care law, had lobbied against a state exchange. Its state director, Brad Stevens, said the governor made the right call.
He said federal control of state exchanges meant the only difference between a state exchange and a federal one would be “whether Nebraska voluntarily cooperates.”
Heineman, also an opponent of the federal law, said he initially wanted to pursue a state-based exchange. Last year, he said a federally run exchange would amount to a federal takeover of the state’s health care system.
He changed his tune in more recent months, as state officials got further with planning for a potential state exchange.
“It became apparent that the Affordable Care Act contains one federal mandate after another,” he said.
Even more troubling was the potential cost of creating a state exchange.
Citing cost estimates developed by the Nebraska Departments of Insurance and Health and Human Services, Heineman said creating a state exchange would cut into money for education or require higher taxes.
Looking at the years 2013 through 2020, the agencies estimated the state’s costs at $646 million for a state exchange, compared with $176 million for a federal exchange.
Insurance Department officials recommended last year that relatively little of the money needed to set up and run a state exchange should come from state general funds.
Nearly 45 percent, or $292 million, would have come from the federal government. A similar-size chunk was expected to come from fees charged to insurance companies or to people buying health insurance.
Heineman spokeswoman Jen Rae Hein said, however, that there has been no agreement reached about fees and that the state might have to use general funds.
Federal officials have said they would plan to charge fees to insurance companies to cover operating expenses of a federal exchange. Those expenses were not included in the governor’s cost estimates.
Heineman’s announcement made Nebraska the latest state to declare its intentions on the insurance exchanges.
As of midday Thursday, Kaiser Health News reported that 17 states and the District of Columbia had committed to creating their own exchanges.
Five said they would partner with the federal government and seven were still pondering the decision.
Twenty-one others, including Nebraska and Iowa, have decided to let the federal government handle the job or have taken no action, which will have the same result.
Tim Albrecht, a spokesman for Iowa Gov. Terry Branstad, said the state cannot decide about creating its own exchange without knowing more about the alternatives. He said that will be the message Branstad sends to the federal government in a letter Friday.
Iowa officials said this week that they have been looking at a partnership exchange. There would be time yet to go that direction.
States have until Feb. 15 to declare whether they want to pursue a joint state-federal exchange.
Other states that put off planning efforts in hopes that the federal law would be repealed may decide to cooperate with the federal government, now that the election has been decided.
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When will the exchange be available?
Exchanges are supposed to be ready to start enrolling customers by Oct. 1, with the policies taking effect on Jan. 1, 2014.
Who can use an exchange?
Any U.S. citizen or legal immigrant. Among those who might use it are part-timers, the self-employed, early retirees, people between jobs and employees of small businesses. Exchanges could be especially attractive to the uninsured.
Why buy through an exchange?
Exchanges will allow side-by-side comparison of insurance policies and may increase choices. Policies will have to meet minimum standards. Navigators, as they're called, will help consumers understand their insurance choices. People who buy through an exchange may qualify for federal subsidies.
Will everyone have to buy insurance?
Yes, nearly everyone must have health coverage or pay a penalty.