Panel mulls health care exchange options in Virginia

By Sarah Bruyn Jones and Michael Sluss 

As Gov. Bob McDonnell balances his ongoing opposition to the federal health care overhaul with the continued implementation of the law, he won't say if Virginia should establish a state-run health insurance exchange or risk having one imposed by the federal government.

But like some other conservative states that have challenged the constitutionality of the law, Virginia continues to move forward in the process of establishing an exchange through small procedural steps. On Monday, legislators will meet in Richmond to hear about options for the exchange.

The exchange, a cornerstone of the Patient Protection and Affordable Care Act, would create a database where individuals and small businesses could shop for insurance coverage. It is supposed to be operational by October 2013, with coverage beginning in 2014.

States have been given broad authority to tailor the exchanges to the needs of their residents.

Virginia already has taken - and mostly spent - a $1million federal planning grant to begin the work of setting up an exchange, and a governor-appointed advisory council spent nearly a year researching and debating the particulars of a state-run exchange. The council, which includes health advocates, insurance executives, business leaders and medical care providers, agreed that an exchange should not be left to the federal government.

Instead, the 23-member group, led by Virginia Health and Human Resources Secretary Bill Hazel, envisioned a quasi-governmental entity with an independent board that operates similar to the Virginia Housing Development Authority.

Last week, McDonnell sent the council's recommendations to the leaders of the Virginia General Assembly along with a strongly worded letter reiterating his opposition to the overhaul while wanting to prevent federal intrusion into state affairs. Absent from the letter was any comment on the recommendations.

"The decisions ahead are not easy and I will neither compromise the financial integrity of Virginia nor leave us vulnerable to the overreaching federal government," McDonnell wrote. "I will continue to evaluate these recommendations while working with Secretary Hazel and other trusted advisors in order to identify and pursue the best course of action for the Commonwealth."

McDonnell also used the letter to echo a growing sentiment among governors that the federal government must answer some critical questions before states can move forward with planning exchanges. He criticized the federal government for not providing information on what the federal exchange will look like or how it will be governed. He also said parts of the law amount to "unfunded mandates" that will harm Virginia's economy and overwhelm the state's health care system.

The National Governors Association, representing both Republicans and Democrats, has argued that states cannot fully consider the complexities of establishing an exchange without more information on certain aspects, like the design of the federal exchange and what benefits must be included in health plans.

A joint meeting of the House and Senate Committees on Commerce and Labor has been scheduled for Monday to hear a report on the exchange.

It is unclear whether legislation to run a state exchange will be considered during the upcoming General Assembly.

Neither Hazel nor McDonnell was available for comment this week, but Keith Hare, the governor's deputy secretary of health and human resources, said that legislation might not be necessary at this point.

Hare said that despite a looming June deadline to apply for millions of dollars in federal funding to create and initially operate a state exchange, Virginia could decide not to act during the 2012 regular legislative session.

Some states have already decided to move forward, and on Tuesday nearly $220 million in federal grants were handed out to 13 states to help them create their exchanges.

Some legislators also are calling for delaying any action. Coloring the political discussion is Virginia's legal challenge to the provision of the health care law that will require individuals to have health insurance or pay a penalty to the government beginning in 2014. Last month the Supreme Court agreed to decide, among other things, whether the mandate is constitutional.

Del. Ben Cline, R-Rockbridge County, said the General Assembly should not pass legislation to set up an insurance exchange during the upcoming session, citing uncertainty about the fate of the federal health care law and the sentiments of voters.

"Given that the federal law doesn't require the exchanges to be set up until 2013 and in light of the federal lawsuit, it seems premature," said Cline, the chairman of the General Assembly's Joint Commission on Health Care and a member of the council that made the exchange recommendations.

But Del. Terry Kilgore, R-Scott County, warned that legislative inaction could result in the federal government setting up an exchange in Virginia, an option he wants to avoid.

"The problem is it's sort of a double-edged sword," said Kilgore, chairman of the House Commerce and Labor Committee.

Kilgore sponsored the legislation asking McDonnell's advisory council for recommendations on setting up an exchange. He said he probably will file a "placeholder" bill for the 2012 session that could become legislation if lawmakers can agree on a structure for an exchange.

"There are lot of unanswered questions right now," Kilgore said, explaining the reason for Monday's meeting.

Hare also said the council's work has put Virginia in a good place to move forward if that decision is made and the law is up held by the Supreme Court.

"If forced to go that direction, pending the outcome of the case, we know we will have to move very quickly," Hare said.

If the Supreme Court upholds the health care law next year, Cline said, state lawmakers still would have enough time to act, perhaps in a special session. But Cline said he and other conservative legislators consider the health care law to be bad policy and "are reluctant to set up any kind of bureaucracy" to implement it.

"Most Virginians would be concerned about an effort to implement any provisions of Obamacare," said Cline, who also serves as co-chairman of the legislature's Conservative Caucus.