How GOP-Led States Can Still Thwart The Affordable Care Act

Days after the Supreme Court voted to uphold the Affordable Care Act, conservatives are pressuring GOP-run states to run interference wherever possible — including by demanding that states refuse to set up insurance exchanges, the government-regulated insurance marketplaces the law requires. And Republicans, angry about the Court’s decision, and aware of a glitch in the health care law as it currently exists, may prove to be receptive.

Louisiana Gov. Bobby Jindal stepped up early. On a Friday conference call Jindal announced “We’re not moving forward with the exchanges. … Instead, we’re going to do everything we can to defeat President Obama, get rid of ObamaCare.” Wisconsin Governor Scott Walker made a similar announcement.This isn’t supposed to be an easy out for Republican governors. The Democratic authors of the ACA knew some states would encounter political or logistical impediments to setting up exchanges on their own, and thus empowered the Department of Health and Human Services to enter states and set up so-called federally facilitated exchanges, even over the objections of state officials.

So why isn’t Jindal reluctantly complying rather than hand a small measure of sovereignty over to the federal government? Because as the result of a drafting oversight, Congress neglected to include automatic appropriations for federally facilitated exchanges (FFEs). That means there’s money on hand to help states that want to set up the exchanges themselves, but the government’s options vis-a-vis states that can’t or won’t act on their own are more limited.

Thus far, HHS has provided exchange establishment awards to 34 states. But the Kaiser Family Foundation lists over a dozen states that have either made no progress toward setting up exchanges or have announced they don’t intend to comply with the ACA. And if conservatives have their druthers, states that have already received grants will be pressured to return them.

If Republican-led states react to the Court’s decision by digging their heels in deeper on the exchanges, rather than by relenting, the federal government will face significant challenges. Though HHS has made some progress creating the federal exchange architecture, it’s likely to run into financial and logistical obstacles.

The Centers for Medicare and Medicaid Services (CMS) can reallocate money appropriated to HHS’ generic operations account internally, to put more toward establishing FFEs. But in anticipation of the need for greater funding, HHS included a request for $1 billion for program operations in its fiscal year 2013 budget, according to administration and Senate officials. The Senate Appropriations Committee, controlled by Democrats, has recommended just over half a billion for this account. But House Republicans could use their leverage to block providing HHS with any funds they think the administration might need to implement the ACA.

There is some pressure on conservative states to hold their noses and create their exchanges. Insurance companies want it done. So do some state officials who stand to be steamrolled by the federal government. Ironically, Mitt Romney’s putative transition chief Michael Leavitt has advised states to create exchanges — and his consulting firm was in the business of providing assistance to states in setting them up. But states only have until Nov. 16 to submit their exchange development plans to HHS. If they’re waiting to act until after the election — or dragging their feet indefinitely — they could still gum up progress toward a fully functional Affordable Care Act through inaction.

This post has been updated for clarity.