Utah Offers to Split Health Insurance Exchange

February 6, 2013, 6:38 PM ET - Wall Street Journal

By Louise Radnofsky

Utah Gov. Gary Herbert said Wednesday that he’s made a new offer to Health and Human Services Secretary Kathleen Sebelius: His state will run half of a health insurance exchange, and let the federal government run the other half.

Washington has been trying for months to coax states into running their own exchanges where individuals and small businesses can shop for insurance policies and apply for tax credits towards the cost of premiums. The federal government has also been preparing to step in and run them on states’ behalf if they refuse, as 32 have done. The exchanges are called for under the 2010 health care law.

But unlike other states, Utah already has a health insurance exchange for small businesses that acts as a one-stop shopping marketplace but doesn’t have some of the regulations included in the federal health overhaul, such as requirements that policies cover a wide range of services and take all customers regardless of their medical history.

The state had proposed using that marketplace, dubbed Avenue H, as the main exchange starting in 2014 to sell policies to individuals and small businesses as part of the federal health law, but state legislators wouldn’t sign off on changes that would have to be made to comply with the federal law.

Mr. Herbert is now holding out a different option.

The governor told an audience at the conservative American Enterprise Institute Wednesday that he was fine with the state not being the public face of the health law’s most contentious elements, including a requirement that individuals either buy insurance or pay a fine, as well as new federal tax credits and expanded Medicaid enrollment standards that he says seem fiscally imprudent.

“This state, Utah, has decided that’s not the right thing, and frankly I don’t want to be on the receiving end of phone calls, which I believe will happen, where individuals are going to say, ‘Hey, I’m getting a call from the IRS and they’re wanting my tax money to pay a penalty because I haven’t signed up for their insurance program,’” he said.

But he added that he had told Ms. Sebelius in a Tuesday meeting that he thought Avenue H could still operate the small-business parts of the exchange, since the state was planning to keep it open anyway and there wouldn’t be a need for the federal government to do it.

Mr. Herbert said he’d asked the secretary “if we cannot coexist peacefully here” and had been “gratified and encouraged” that she seemed to be willing to entertain the idea. He said she’d concluded their conversation by saying, “I’d like to find a way to get to yes.”

Erin Shields Britt, an HHS spokeswoman, said the discussion had been “productive” and that Ms. Sebelius told Mr. Herbert that she “wants to continue to be as flexible as possible within the confines of the law and HHS will continue working closely with state officials moving forward.”