RICHMOND, Va. -- The federal government is giving states a break on a looming deadline for creating health benefits exchanges -- and an opening for Gov. Bob McDonnell to back away from opting for a federally run exchange in Virginia.
U.S. Secretary of Health and Human Services Kathleen Sebelius informed state governors on Friday that they will have an additional month to submit a detailed blueprint for creating their own exchanges under the Patient Protection and Affordable Care Act.
States will have until Feb. 14 if they want to enter into a partnership with the federal government to jointly operate an exchange that would act as a clearinghouse for health insurance plans for many individuals and small businesses.
"This administration is committed to providing significant flexibility for building a marketplace that best meets your state's needs," Sebelius said in the letter to governors, many of whom had, like McDonnell, waited to act on the law until the re-election of President Barack Obama this week.
The day after the election, McDonnell said that if the state had to make a decision by next Friday, the original deadline, Virginia would opt for a federal exchange because it doesn't have enough information on the alternatives.
The McDonnell administration hedged on that position Friday, before Sebelius sent her letter, by suggesting it would consider the partnership model if given more time to get more information about how it would work.
"We just don't feel like we can obligate the commonwealth to something we don't completely understand," said Virginia Secretary of Health and Human Resources Bill Hazel in a conference call with Tucker Martin, the governor's communications director.
In response to Sebelius' letter, Martin said: "We have just received this information and are currently determining what impact, if any, it has on the previous requests of many governors."
Asked how the extended deadlines would affect McDonnell's stated position, he said: "We will review this information thoroughly before making any further comment."
Conservative organizations such as Americans for Prosperity had hailed the governor's choice of a federal exchange as a principled refusal to carry out the health care reform law, which survived both review by the U.S. Supreme Court and crucial elections for the U.S. Senate as well as the presidency.
But adopting a federal exchange also would reverse a decision by McDonnell and the General Assembly more than a year ago for Virginia to operate its own exchange, if the law were upheld.
Virginia health insurers strongly favor creation of a state-based exchange, which they say would give the state more control over the health insurance marketplace and prevent the federal government from shaping the competition.
"Virginians should be making decisions about what happens in Virginia's marketplace," said Doug Gray, executive director of the Virginia Association of Health Plans.
The Virginia Health Reform Initiative Advisory Council, appointed by McDonnell and chaired by Hazel, also strongly supported creation of a state exchange, but the governor did not act on its recommendations and instead helped block consideration of a state exchange by the assembly earlier this year.
Sen. John Watkins, R-Powhatan, said Friday that he intends to introduce legislation again in January to establish a state-based exchange, but added that he would be open adopting a "modified model ... in the interim."
States that choose a partnership with the federal government or default to a federal exchange in 2014 still would have the opportunity to move to a state exchange in the following year, McDonnell noted this week.
States will be able to apply for federal grants through 2014 to establish their exchanges.
The problem for many states with Republican governors who had bet on the election of Republican presidential nominee Mitt Romney is the short time between Obama's re-election and a Nov. 16 deadline for states to declare if they intend to operate their own exchanges and submit a blueprint for doing so.
Sebelius kept the deadline for a declaration, but gave the states until Dec. 14 to submit their blueprints. The law requires HHS to certify by Jan. 1, 2013, that a state will be prepared to open an exchange for enrollment by Oct. 1 and operation by Jan. 1, 2014.
"I think it's a reasonable extension of the olive branch, if you would, to the governors," Watkins said. "I think it is a truly conciliatory move on their part. They didn't have to do that."
Virginia had been planning on the assumption that it would operate its own exchange, said Hazel, who is concerned now that the state doesn't have enough time to be ready for enrollment in October.
"I don't think it's doable," he said.
Virginia had included a requirement for setting up an insurance exchange network in a request for bids to install a new eligibility and enrollment system for Medicaid and other human service programs.
The contract for the enrollment system is pending approval by the attorney general's office, but Hazel said it no longer includes the provision for a health benefits exchange.
He said the state is still seeking answers to questions posed by McDonnell to the president on behalf of the Republican Governors Association last summer on how the different kinds of exchanges would be structured.
"I honestly think we're lacking the information to make a decision on what we build," he said.
mmartz@timesdispatch.com (804) 649-6964 ___
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