KHI News Service

Grant giveback creates uncertainty about insurance exchange

But insurance department officials say exchange work groups will continue to meet

By Dave Ranney, Jim McLean | August 10, 2011

Kansas Insurance Commissioner Sandy Praeger.

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Gov. Sam Brownback's decision to reject a $31.5 million federal grant will make it harder for the state to establish its own health insurance purchasing exchange, according to Kansas Insurance Commissioner Sandy Praeger.

But others, including Lt. Gov. Jeff Colyer and Rep. Brenda Landwehr, both conservative Republicans, say returning the early innovator grant, which required Kansas to be out in front of other states, will make it easier to get the Legislature more heavily involved in plotting the state’s course.

The federal health reform law known as the Affordable Care Act (ACA) requires states to set up their own exchanges, where, starting in 2014, individuals and small businesses can purchase private health insurance plans and apply for federal subsidies. The law requires the federal government to establish exchanges in states that choose not to set up their own.

Officials in Florida and Louisiana have said they don’t plan to create state-based exchanges following ACA requirements. Whether Kansas will join that group remains to be seen, Praeger said.

“The process of pulling out of this innovation project, I think, sort of puts the ball back in the governor’s court,” Praeger, a moderate Republican, said in an interview with the KHI News Service. “If we are going to proceed on exchange implementation, there are other grants we can apply for that are certainly not as comprehensive as the innovation grant would have been. But that would require the governor signing off.”

For now, the insurance department will continue to convene meetings of its exchange planning work groups.

"We're meeting with the work group chairs next week to see how they want to move forward," said Linda Sheppard, director of the insurance department's accident and health division. "We have gotten no indication from the administration that they want us to stop our exchange planning."

Brownback voted against the health reform legislation as a member of the U.S. Senate and said during his campaign for governor that he would resist its implementation. Despite that pledge, he gave Praeger the green light in December to move forward with developing an exchange in Kansas and signed letters allowing her to accept the grant that is now being returned.

The governor and his spokesperson, Sherienne Jones-Sontag, also publicly defended the initial decision to accept the grant, saying it provided the state with flexibility to design an exchange that met the needs of Kansans.

Speaking on behalf of the Brownback administration, Colyer declined to commit to establishing a state-based exchange. But he acknowledged that other sources of federal money still might be available to help fund it should the state decide to create one.

“The Legislature needs to make its decision on how it wants to deal with that,” Colyer said. “And we are fully supportive of allowing the Legislature the opportunity to help us – to help everyone – build what works best for Kansas.”

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Rep. Brenda Landwehr, R-Wichita.

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Rep. Brenda Landwehr, a Wichita Republican and chair of the House Health and Human Services Committee, said she and others in the Legislature are interested in talking about a state-based exchange that “wouldn’t have anything to do with Medicaid and may not have anything to do with ObamaCare.”

An exchange like the one Landwehr describes would probably not meet the requirements set out in the Affordable Care Act. That raises the possibility that the state and federal governments could establish competing exchanges.

Landwehr was the only legislator serving on one of the work groups formed by Praeger under the innovation grant to plan the exchange. She led the committee working on how to integrate the state’s $2.7 billion Medicaid program into the exchange.

“We can still look to see what an exchange for Kansas would look like irregardless of what I refer to as ObamaCareless,” she said, putting a new twist on the term that opponents of health reform use to refer to the law.

But not all GOP legislators support Brownback's decision to stop drawing down innovation grant funds and pay back the $400,000 to $600,000 the state has already spent. Rep. Bob Bethell, chair of the Committee on Aging and Long Term Care, called the decision “a mistake.”

“At the very least, we’re setting ourselves up for the feds coming in and making us do things their way,” said Bethell, R-Alden. “I don’t think that’s wise for Kansas.”

In addition, Bethell said he believed the governor “circumvented” the legislative process.

“The Joint Health Policy Oversight Committee made it clear last year that we wanted to move ahead on this (the exchange),” he said. “And now, all of a sudden, we’re not. What’s the process in that?”