Gov. Bob McDonnell has informed the Obama administration that Virginia won't create a state-based health benefits exchange for 2014, deferring for now a decision on how best to manage an insurance marketplace for individuals and small businesses.
McDonnell informed the administration of his decision in a letter to U.S. Secretary of Health and Human Services Kathleen Sebelius on Friday, the deadline for states to request conditional approval for a state-run health benefits exchange. McDonnell's decision was not a surprise. For months, he has complained that the federal government has not provided enough information for his administration to determine whether Virginia would have enough control over its own exchange.
Virginia received a $1 million federal grant to plan for its own exchange, and a McDonnell-appointed advisory council concluded last year that an exchange should not be left to the federal government. Virginia health insurers also have voiced support for a state-run exchange.
"Originally, I asked that we begin the planning process to potentially operate a state-based exchange for Virginia, primarily so we would be in control of this process," McDonnell said in a statement late Friday afternoon. "However, despite repeated requests for information, we have not had any clear direction or answers from Washington until recent days, and we cannot conclude, as we review those materials, that we would have the control and flexibility needed to efficiently and effectively run our own state exchange."
The exchanges, which are mandated under the Patient Protection and Affordable Care Act, are supposed to be running by Jan, 1, 2014.
McDonnell has said he's not ready to move forward on two key provisions that require action by the states -- expanding the Medicaid program and creating the state-based health insurance exchange.
The exchange would serve as a database where individuals and small businesses could shop for insurance coverage.
If a state chooses not to set up its own exchange, it can defer to the federal government to run the exchange or enter into a partnership arrangement. States have until Feb. 15 to decide whether to default to the federal government or form a hybrid exchange.
As of Friday afternoon, only 17 states and the District of Columbia had declared plans to run their own exchanges.
McDonnell said Friday that state officials will review information they recently received from the federal government before making a decision.
"If Virginians are faced with running a costly, heavily regulated bureaucratic exchange without clear direction from Washington, then it is in the best interest of our taxpayers to let Washington manage an exchange at this time," McDonnell said. "We would like the ability to control our health insurance marketplace, and will continue dialogue with the federal government to clearly understand the logistics of this option before making a decision."
Democrats in the Virginia Senate said last month that McDonnell should call a special session of the General Assembly to establish a state-based health insurance exchange, a proposal that McDonnell's office dismissed as a public relations ploy.
In his letter to Sebelius, McDonnell noted that states can apply for planning grants for state-based exchanges through October 2014 and choose that option "if the federal government's exchange is inadequate." He said his administration is "hopeful for the opportunity of continued dialogue" on the issue.
In the letter, McDonnell also reiterated objections to expanding the Medicaid program in 2014 to include people with incomes up to 133 percent of the federal poverty level. The federal government would pay for 100 percent of the expansion for the first three years, and then gradually reduce its share to 90 percent by 2020. But states can opt out of the expansion.
"Virginia cannot consider such expansion, unless there is a dramatic reform of the program at the federal level, to include state flexibility and waivers, and state methods to address the significant growth in Medicaid spending in state budgets," McDonnell wrote.
Distributed by MCT Information Services
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