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Possible end to subsidy no prod to states on insurance exchanges

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Don't count on many states to quickly establish their own insurance exchanges to keep their residents covered if the U.S. Supreme Court this month strikes down premium subsidies in states using the federal exchange.

Elected officials in most of the 34 to 37 states where subsidies are at risk don't know or won't say what they'll do if the justices eliminate the health care reform law subsidies in their states, a Modern Healthcare survey of the states found. Instead, many states are playing wait-and-see, hoping Congress or the Obama administration will bail them out if thousands of residents suddenly lose affordable coverage. Even in states where governors or lawmakers want to set up a state-run exchange, fierce Republican opposition, high costs, logistical hurdles and timing likely would prove insurmountable barriers.

The high court is expected to issue a ruling in late June in King v. Burwell, in which reform law opponents claim that the law's language allows subsidies only through exchanges “established by the state” and not through the federal exchange.

“Even under the best of circumstances, with all the political winds at their back, the states would have a hard time ramping up for Nov. 1 open enrollment,” said Nicholas Bagley, an assistant professor of law at the University of Michigan, who supports the Affordable Care Act.

If the court rules against the administration, an estimated 6.4 million Americans in states using the federal exchange would lose subsidies totaling $1.7 billion, according to the Kaiser Family Foundation. Most, particularly younger and healthier people, likely would drop coverage. That would severely disrupt the individual insurance markets. Unless the court stays its ruling, those losing subsidies would likely have to pay full premiums by Aug. 1 or face coverage cancellation, Mr. Bagley said.

Under existing HHS rules, states that want to establish their own exchanges for 2016 enrollment would have to obtain conditional federal approval for their plan by mid-June. Some experts, however, say the Obama administration likely would do everything it could to clear the way for states to set up their own exchanges. But administration officials and other experts say HHS has little leeway.

In addition, federal funds to help states establish their own exchanges are no longer available. And at least nine states have bans on implementing further provisions of the law without legislative approval, according to the National Conference of State Legislatures.

Nevada, New Mexico and Oregon each authorized a state-run exchange but currently are using the federal exchange for most enrollment functions. Legal experts say it's not clear whether a court ruling striking down the subsidies would affect their residents.

Some states may consider setting up exchanges that rely on the federal HealthCare.gov technology. But Mr. Bagley notes that the administration has offered no guidance to states about how they can establish a state exchange along those lines.

Michael Cannon, the Cato Institute's director of health policy studies and a key strategist behind the legal challenge to the subsidies, said it's probably too late for states to set up their own exchanges in time for the next open enrollment in November.

But heading into the 2016 elections, even Republican leaders in red states would be acutely sensitive to voters' reactions to a massive loss of coverage. What follows is a roundup of where the states in question stand on establishing their own exchange if the Supreme Court strikes down the subsidies.

Likely to try

In Pennsylvania, new Democratic Gov. Tom Wolf has submitted a plan to the CMS to launch a state exchange to preserve subsidies for 349,000 residents who currently receive them. But it's unclear if the GOP-controlled House and Senate would try to block the effort. GOP legislative leaders went along with Medicaid expansion under the health care law last year.

Delaware, which has a Democratic governor and a Democratic-controlled Legislature, has submitted a “blueprint” application to potentially run a state-based exchange while continuing to rely on the federal government's enrollment platform. Currently, about 19,000 residents receive premium subsidies.

Might try

Illinois, a blue state which has a new Republican governor and a Democratic-controlled Legislature, came close to establishing its own exchange in previous years when the state had a Democratic governor who supported the reform law. Legislation to set up an exchange passed the Senate but not the House. Now, however, Gov. Bruce Rauner, who has opposed the reform law in the past, has indicated that he won't make a decision until the ruling comes out. Currently, about 232,000 Illinoisans receive subsidies.

Purple Ohio is a key swing state in next year's elections and Republican Gov. John Kasich, one of the first GOP governors to expand Medicaid, has said he's open to establishing a state-run exchange to preserve coverage. But that likely would be a hard sell in the Republican-controlled Legislature, which strongly resisted Medicaid expansion. Currently, about 161,000 Ohioans receive subsidies.

In Arkansas, a red state, there were previous discussions about establishing a state-run exchange by 2017. But that was before a Republican governor replaced a Democratic one in the 2014 elections and more conservative Republicans gained a stronger hold on the Legislature. Even so, Arkansas, which expanded Medicaid early on, is considered one of the likeliest GOP-led states to consider a state-run exchange. Currently, about 48,000 residents receive subsidies.

Utah, a red state with a Republican governor and GOP-controlled Legislature, previously set up a small-business exchange under the act and may be willing to consider setting up its own individual-market exchange. Gov. Gary Herbert currently is talking with the administration about expanding Medicaid.

“We would need to negotiate various conditions with the administration,” a spokesman for the governor said. Currently, about 86,000 residents receive subsidies.

Indiana, which has a Republican governor and a GOP-controlled Legislature, recently expanded Medicaid under the health care law. Doug Leonard, president of the Indiana Hospital Association, said that, while it's too soon to say whether the state's elected officials will move to establish a state exchange, Gov. Mike Pence seems committed to expanding coverage. Currently, nearly 160,000 Indianans receive subsidies.

Montana, a red state with a Democratic governor and a Republican-controlled Legislature, recently passed a law to expand Medicaid under the act. A spokesman for Gov. Steve Bullock said options for a post-King ruling are being discussed but declined to elaborate.

“The governor clearly wants to make sure the folks in Montana have health insurance,” he said.

But the Montana Legislature hasn't been keen on establishing an exchange, said Dick Brown, president of the Montana Hospital Association. Currently, nearly 42,000 Montanans receive subsidies.

In Michigan, Gov. Rick Snyder, considered a Republican moderate who expanded Medicaid, has said it is important to wait to see how the Supreme Court rules, then watch how federal lawmakers respond. But it might be tough to win approval from the state's GOP-controlled Legislature. Currently, about 228,000 Michiganders receive subsidies.

New Hampshire, a purple state with a Democratic governor and a GOP-controlled Legislature, now has a partnership exchange and has expanded Medicaid. But GOP lawmakers pushed through a law barring the state from establishing an exchange. There is pending legislation that would reverse that. Currently, nearly 30,000 New Hampshire residents receive subsidies.

In New Jersey, a blue state, observers are watching to see what position Republican Gov. Chris Christie, who is exploring a run for president, will take on setting up a state-run exchange, which likely would have the support of the Democratic-controlled Legislature. Gov. Christie has expanded Medicaid. Currently, about 172,000 residents receive subsidies.

Unlikely to try

There are 23 states where fierce opposition to the president's health care reform law from Republican leaders and other factors make it unlikely that there will be any immediate efforts to establish a state-run exchange. Those states are Alabama, Alaska, Arizona, Florida, Georgia, Iowa, Kansas, Louisiana, Maine, Mississippi, Missouri, Nebraska, North Carolina, North Dakota, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Virginia, West Virginia, Wisconsin and Wyoming. That's unlikely to change even if the Supreme Court knocks out the subsidies received by a total of 4.86 million people in those states.

Paul Salles, CEO of the Louisiana Hospital Association, said there's “zero discussion” about setting up a state exchange in Louisiana, where Republican governor and presidential aspirant Bobby Jindal has been a leading reform law critic.

Lisa Schencker and Virgil Dickson write for Modern Healthcare, a sister publication of Business Insurance.