Health Market Science

The U.S. Department of Health and Human Services recently announced it will be awarded $220 million in grants to 13 states to create health insurance exchanges under the health care reform law. The exchanges, or online healthcare marketplaces, will allow consumers and small businesses to compare health insurance rates and shop for providers.

In August, the HHS issued five proposed regulations on health insurance exchanges under the Patient Protection and Affordable Care Act. States that establish their own internet-based exchanges by 2014 will have more options of eligibility for tax credits and Medicaid than what would be available under the proposed regulations, Health Insurance Report said.

Further, states will have an additional six months to apply for a grant to establish a health insurance exchange, providing them more time to receive legislative approval for the technology. The extension applies only to applications for Level One grants, which offer a year of funding for states that have shown progress using prior grants for the creation of a state-level exchange system, the source reported.

In a press conference, HHS Secretary Kathleen Sebelius said next year states will also be able to apply for Level One awards, which can be used to help hire staff for coordinating the exchanges with state Medicaid programs and cover other various expenses. The exchanges will initially be used for individuals and small businesses looking for coverage, but in 2017 states can open it up to large businesses as well. Sebelius said more than half of the states that have already received grants have made significant progress in their development of the health insurance exchanges.

"States are moving at their own pace to get their exchanges up and running," said Sebelius. "This is a natural result of the process that gives states maximum flexibility."

According to the HHS, all states will eventually have health insurance exchanges, and the HHS will establish the system in states that do not do so themselves. Grants can still be used for the development of exchanges even if they are not ready until after 2014, but all exchanges must be self-sustaining by 2015. While the exchanges are being mandated by the federal PPACA, they will remain subject to state insurance rules even if the federal government is operating them.

New Mexico, one of the 13 states receiving grants, was awarded $34 million to help create its exchange, the Albuquerque Journal reported. Although Governor Susana Martinez vetoed a bill in April that would have helped create an insurance exchange, her office said the federal grant is an important step towards modernizing the state's healthcare systems.

Maine Biz reported that Maine will be receiving $6 million in federal grants for establishing an exchange, despite the state continuing to challenge the constitutionality of the Affordable Care ACT in a multi-state lawsuit taken to the U.S. Supreme Court.

Maine is one of 26 other states to challenge the healthcare reform law, arguing that Americans should not be penalized for not having health insurance. Florida U.S. District Court Judge said the law was unconstitutional in February, prompting the HHS to appeal the ruling to the Supreme Court. So far, six of the 26 states challenging the law have accepted federal grants if the Supreme Court upholds the law, which should be determined in June, the source reported.