Experts: Decisions by states on healthcare offer insight into 2012

States that have chosen to allow the federal government to operate a high-risk pool of uninsured people are the ones most likely to punt again when most of the coverage benefits go into effect years down the road.

While it’s too early to know with any certainty what individual states will end up deciding two years from now, especially when the outcome of legal challenges to the law will still playing out, experts say it's unlikely that the politics of healthcare reform will dramatically change anytime soon.

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The insurance exchanges to cover millions of people are scheduled to be up and running in 2014, but states must decide as early as 2012 whether to operate them or have the Department of Health and Human Services (HHS) take over, similarly to what happened with the high-risk pools for sick people who can’t find affordable coverage. That latter decision has attracted charges of partisan politics. With only three exceptions, the 19 states that have declined to run their own show are run by Republican governors.

Those states “have self-selected themselves as the states that are clearly the most likely to choose not to run their own exchange,” said John McDonough, a Democrat and senior advisor to the Senate health committee during the health reform debate who before that helped shape Massachusetts’ health overhaul.

“I would say the most important demographic factor [explaining governors’ decision] is a color: red,” added McDonough, now a fellow at Hunter College in Manhattan. “It would be considered potentially unwise to be perceived by your electorate to be collaborating with the Obama administration on this.”

The 2010 elections will be seen at least to some degree, as a referendum on the president's health reform law. Some congressional Republicans have vowed not to fund healthcare reform if they take control of either the House or Senate early next year. And with potential GOP presidential candidates calling for the law to be repealed, the debate is expected to be a top issue in President Barack Obama's anticipated 2012 reelection campaign. Therefore, the coverage decisions by states in 2012 will be viewed by many through a political prism.

Edmund Haislmaier, a senior research fellow for health policy studies with the conservative Heritage Foundation, said some Republican states may decide to gamble that health reform will eventually “blow up, get repealed, or both.”

Some may decide, “I‘m just going to do nothing – it’s [HHS’ mess], let them deal with it.”

The states that have opted to let HHS run a high-risk pool for them are: Alabama, Arizona, Delaware, Florida, Georgia, Hawaii, Idaho, Indiana, Louisiana, Minnesota, Mississippi, Nebraska, Nevada, North Dakota, South Carolina, Tennessee, Texas, Virginia and Wyoming. Only three – Delaware, Tennessee and Wyoming – are led by Democrats. Utah and Rhode Island will make their final determinations later.

Governors who let HHS administer the program have justified their decisions by claiming the $5 billion set aside by the health reform law will run out before the program expires in 2014, at which point insurance market reforms will make high-risk pools unnecessary. That could have left them having to foot the bill for several years.

“Our decision regarding the high-risk pool was based only on facts we had about the high-risk pool,” said Jane Jankowski, spokeswoman for Republican Gov. Mitch Daniels of Indiana. “We’ll look at each decision separately. It’s too early to know about the exchange. Much more information will be needed before a decision is made.”

Still, politics will clearly factor into the exchange decision – just as they did for high-risk pools. Of the 19 states, 14 – almost three-quarters – have joined lawsuits questioning the health reform law’s constitutionality (Democratic-led Delaware, Tennessee and Wyoming are the exceptions, along with Hawaii and Mississippi).

Asked whether Nevada is leaning in any direction on the insurance exchange issue, a spokesman for Republican Gov. Jim Gibbons simply reiterated that “Gibbons has also taken steps to join [20] other states in the upcoming lawsuit against the Reid/Pelosi/Obama nationalized healthcare law. Gov. Gibbons believes the law tramples the U.S. Constitution.”

McDonough said some states might wait for the lawsuit to play itself out first, and tone down their rhetoric if the courts rule for the administration. He added that governors who nevertheless still want to leave HHS in charge would probably run into opposition from their own insurance commissioners.

“There will be a tension there,” McDonough said, “because while states may not like the law it’s to a state’s advantage for states to run it themselves.”

Haislmaier said he would advise states not to allow HHS run the program but to instead get ahead of the federal government and set up their own exchanges before 2014 – even if they don’t meet the new law’s standards regarding the range of benefits offered or the plan designs. If those state solutions turn out to be popular, HHS would then be left with the unpalatable choice of having to decide whether to challenge them.

“I think most states will want to do their own exchanges,” he said. “There’s a whole movement that wants to take this in a totally different direction.”

Kansas State Insurance Commissioner Sandy Praeger said that in the end, states’ decision may well rest in the hands of HHS: If the department is flexible enough in its guidance, even conservative states will likely cooperate.

“I think most states will want to do their own exchanges because it gives you an opportunity to manage the market themselves,” said Praeger, a Republican who chairs the National Association of Insurance Commissioners’ insurance committee.

“Unless rules as they come out are so onerous that states want to wash their hands of it – and that’s always a possibility.”

Still, Praeger made clear, she’s encouraged by what she has seen so far.