Delegate seeks bill for health insurance exchange

Gov. Bob McDonnell won't seek legislation next month to create a health insurance exchange, but a top Republican in the House of Delegates said the state cannot afford to wait and risk the federal government imposing an exchange with its own rules.

Del. Terry G. Kilgore, R-Scott, chairman of the House Commerce and Labor Committee, said Monday that he already has asked that legislation be drafted to create a state-operated exchange under the Patient Protection and Affordable Care Act.

"Somebody's going to have to do something this session," Kilgore told reporters after a joint meeting of the House and Senate commerce and labor committees on issues facing them in federal health care reform.

Kilgore said his request, made just before the Monday deadline for drafting bills to be pre-filed, is meant as a placeholder that will be revised to address the details of creating an exchange.

"There are a lot of issues we're going to have to address over the next year," he said. "Time's wasting."

In contrast, Virginia Health and Human Resources Secretary Bill Hazel said the federal government had left too many questions unanswered about how to set up an exchange, a central feature of what he called "Obamacare" after President Barack Obama, its principal sponsor.

"We don't believe there is a need for new legislation right now," Hazel said.

As chairman of the Virginia Health Reform Initiative Advisory Council, Hazel had said the state needed to prepare to comply with the federal health care overhaul in case the U.S. Supreme Court does not invalidate all or part of the law next year.

However, McDonnell took a defiant stand in a letter to legislative leaders the day after Thanksgiving in which he denounced the federal government for failing to give states enough guidance to decide whether to create their own exchanges.

University of Virginia political analyst Larry J. Sabato said the decision not to offer a legislative solution plays to McDonnell's ambitions as a potential Republican vice presidential candidate next year.

"No Republican with national ambitions can afford to get on the wrong side of Republicans on Obamacare — you can't be too anti-Obamacare," Sabato said. "Rhetorically, this puts McDonnell in a good position. Forget about policy."

Virginia has until late June to seek a federal "establishment grant" to pay the costs of setting up its own exchange, and until Jan. 1, 2013, to prove to the U.S. Department of Health and Human Services that the state has taken the necessary steps to have the exchange ready for operation a year later.

If the state doesn't meet those deadlines, the federal government will step in with its own health insurance exchange.

"We've given states the guidance, funding and flexibility they need to move forward on setting up an exchange, and we encourage all states to use these resources to establish a state exchange," HHS spokesman Keith Maley said Monday.

"Many states are moving forward, but if they chose to cede that authority, the citizens of Virginia will be able to access the benefits of a federally facilitated exchange," Maley said.

But health insurance providers are worried that a federal exchange would pursue an activist role in deciding which health plans could compete and which could not, rather than the "passive purchaser" role recommended by the advisory council.

"That's a huge risk if you don't take this opportunity," said Doug Gray, executive director of the Virginia Association of Health Plans.

Some legislators are worried about the unknowns in setting up an exchange, such as what the minimum benefits package would be, how the state would pay for the exchange's operation after the federal government pays for the initial setup, and how much it would cost for businesses to comply.

They also asked whether the exchange and other requirements of the law would survive if the Supreme Court strikes down the mandate that all people have health insurance, as Virginia and a number of other states have argued the court should do.

"The good news is that other states are grappling with the same issue," said Franklin D. Munyan, staff attorney for the commerce and labor committees. "The bad news is the sword is hanging over our heads."