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Kansas rejects $31.5 million for insurance exchange

Gov. Sam Brownback returns federal funds designated for health reform

By Dave Ranney, Phil Cauthon | August 09, 2011

Gov. Sam Brownback announced today that the state would return a $31.5 million grant to the federal government that was awarded to help Kansas officials create an insurance purchasing exchange required by federal health reform.

The announcement comes amid pressure from Republican lawmakers to block implementation of the federal health reform law known as the Affordable Care Act. Several resolutions opposing implementation of the law and urging the return of federal grant money associated with it are expected to be considered Saturday when the Kansas GOP Central Committee meets to draft the party’s platform.

"There is much uncertainty surrounding the ability of the federal government to meet its already budgeted future spending obligations. Every state should be preparing for fewer federal resources, not more. To deal with that reality Kansas needs to maintain maximum flexibility. That requires freeing Kansas from the strings attached to the Early Innovator Grant," said Brownback, a Republican.

The grant being returned was awarded to the Kansas Insurance Department in February. Since then, Insurance Commissioner Sandy Praeger had been working with groups of stakeholders — including health care providers, insurers and businesses — to design a Kansas exchange, a Web-based system through which thousands of Kansans and small businesses are expected to purchase private coverage starting in 2014.

If Kansas decides not to establish its own exchange, the law requires the federal government to operate one in the state.

Praeger, a moderate Republican, has gained national attention for her efforts to keep implementation of health reform moving forward in the state despite growing opposition from conservatives in her party who control the governor’s office and the Kansas House of Representatives.

Kansas Insurance Department Commissioner Sandy Praeger.

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Kansas-run exchange would be ’less disruptive’

At a forum yesterday held for state businesses, Praeger said it's important that Kansas operate its own exchange.

"Health care is locally delivered. Networks involved in delivering those services are local — doctors, hospitals. Health plans are organized around those local networks. It's really hard to make a comparison between how health care is delivered in Kansas and the way it might be delivered in New York state, for example. So I think it would be much less disruptive to have an exchange that is created and run by Kansans," Praeger said.

Also affected by today's announcement are state officials working on modernizing Kansas' Medicaid enrollment computer system. After an initial $40 million federal grant to upgrade the system was scaled back to $13 million, officials said they planned to draw on the innovator grant to help pay for the anticipated $62 million cost.

Insurance exchanges — whether run by the federal government or by a given state — will also help consumers enroll in Medicaid if they qualify. Otherwise the same system will steer them to private insurance options.

Opposition to ‘Obamacare’

Kansas House Speaker Mike O’Neal, R-Hutchinson, issued a statement supporting the governor’s decision.

Also supportive of the decision was Rep. Brenda Landwehr, a Wichita Republican who has been among the federal health reform law's most outspoken critics in the Kansas Legislature.

In May, Landwehr agreed to chair one of the work groups formed by Praeger's office to work toward implementing a Kansas insurance exchange. Currently, she is the only legislator on the work groups.

Landwehr today said that group would continue to meet and discuss whether forming an exchange is best for Kansas.

“The decision that’s been made is ‘OK, let’s go about our business, let’s do what we think is right,’” she said. Landwehr said she and others are interested in creating an exchange that “wouldn’t have anything to do with Medicaid and may not have anything to do with ObamaCare.”

“I just don’t see how the feds are going to enforce all these deadlines that they can’t meet themselves,” she said. “If 20 or 25 states decide not to do this (develop exchanges), how is the federal government going to come in and set up 20 or 25 exchanges? They can’t do that, logistically.”

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 Praeger to accept the grant that is now being returned.

Kansas was one of six states selected to receive so-called early innovator grants to plan exchanges. Oklahoma returned its award earlier.

Kansas also is one of 26 states involved in a federal lawsuit seeking to overturn the law’s individual mandate — the requirement that starting in 2014 virtually all Americans purchase health insurance or face financial penalties.

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