Just beating the June 1 deadline, Pennsylvania and Delaware submitted “blueprints” to HHS indicating their intent to establish an exchange. The entire blueprint is filled with TBDs. Nothing has been done yet. The states haven’t passed the requisite legislation, and the legislatures have not appropriated funding for it.  Consider Pennsylvania’s blueprint.

The draft legislation hasn’t even been enacted yet.

 

Virtually every single function will “leverage the Federal platform.” For example, PA will not “conduct verification”

 

The Exchange will “use the federal technology platform.”

 

Yet, somehow, with nothing more than a bunch of TBDs and unobtainable deadlines, HHS has “conditionally approved” Pennsylvania’s blueprint.

The Obama administration on Monday gave Pennsylvania and Delaware a head start in the scramble to save residents from losing health insurance coverage, the possible result of a U.S. Supreme Court ruling expected this month.

The action – conditional approval to establish state-based insurance marketplaces – moves forward both states’ efforts to preserve health insurance subsidies for their citizens.

I could not find the letter, but The Hill has excerpts:

Health and Human Services Secretary Sylvia Mathews Burwell sent letters to both states’ health officials, in which she congratulated them for “reaching this significant milestone.” Neither letter mentions the court case.

“These Marketplaces will be the gateway for each state’s residents and small businesses to shop for a broad choice of affordable, quality health insurance coverage,” the agency wrote in a statement, which also announced new approval for a small business marketplace in Arkansas.

 

As I discuss in the Federalist Society White Paper, the text of the ACA requires that states have a source of legislation and funding available to establish an exchange. There is nothing in the statute about conditional exchanges, nor is there any indication of what happens if a state fails to meet its deadlines. Certainly HHS will continue the subsidies indefinitely as the states due their best to meet unrealistic deadlines.

One proposal by former HHS Secretary Michael Leavitt suggests that HHS should relax the rules to make it easier for states to establish exchanges:

• Allow states to develop innovative approaches that leverage existing private-sector resources such as enrolling individuals through direct enrollment with insurance carriers, web brokers, and private exchanges.
• Allow states to adopt state marketplaces without requiring immediate establishment of a governing board.
• Simplify the state declaration and application process to allow expedited establishment of state marketplace features (i.e. provide flexibility on June 1 marketplace application deadline and blueprint submission process).
• Allow states to apply for an immediate but limited funding opportunity to access capital that is necessary for taking on responsibility of marketplace administration functions.
• Allow states to pool and share expenses such as call centers, Project Management Organizations, and training.
• De-prioritize navigator programs and increase reliance on existing outreach and enrollment channels that will not add new costs for consumers.
• Adjust timelines for qualified health plan certification and recertification to include more state involvement.

In other words, allow states to deem the federal exchange as a state exchange. No doubt the Secretary of HHS can manifest this authority if politically expedient–Democrats could stand to gain by making Republicans sweat this out if people lose subsidies–but it would amount to an end-run around an adverse decision in King v. Burwell.

Update: HHS’s letters to Pennsylvania and Delaware are available. The letter is significant because it notes that “Pennsylvania has received conditional approval to establish a State-based Marketplace.” They are only approved to establish one–not that they have established one. The letter adds that “conditional approval reflects the progress the Pennsylvania Marketplace has made and an expectation that the Pennsylvania marketplace will be ready to provide a broad choice of affordable, quality coverage for consumers and small businesses as a SBM in 2016. The letter continues, CMS “has reached this decision based on Pennsylvania’s attestations, progress to date, and expected progress across the spectrum of Marketplace requirements and is contingent upon the following conditions: (1) Timely demonstrations of the ability to perform required Marketplace activities in line with the attestations Pennsylvania has made in its Marketplace Blueprint Application submission; compliance with federal regulations and completion of expected progress benchmarks.”

It is unclear if this is sufficient in HHS’s mind to continue subsidies, or will the exchange actually have to be established.