Virginia Governor Bob McDonnell. Virginia is one of the states that declined to create a state-based health insurance exchange. Photo by Gage Skidmore. (CC BY-SA 2.0)

In May 2011, the Urban Institute, with the support of the Robert Wood Johnson Foundation, undertook a comprehensive monitoring and tracking project to examine the implementation and effects of the Patient Protection and Affordable Care Act (ACA) of 2010. This project is ongoing.

In September, as part of this project, we looked at how 10 states, all of which had expressed at least some early interest in developing a state-based health insurance exchange, were considering implementing their exchanges. These 10 states were Alabama, Colorado, Maryland, Michigan, Minnesota, New Mexico, New York, Oregon, Rhode Island, and Virginia.

At the time, Alabama, Michigan, New Mexico and Virginia had not already established a state-based exchange.  All four states are currently led by Republican governors (more on this in a moment).

Friday was the last day states could tell the federal government if they wanted to participate in running ACA health exchanges in 2014. Of the four states in our study still on the state-exchange fence, two (Alabama and Virginia) bypassed creating a state exchange, opting instead for a fully federal exchange.

Michigan declared its intention to participate in a partnership exchange, while New Mexico declared its intention to form a state-based exchange.  The other six study states had previously committed to developing state-based exchanges.

Much has been made of the political demographics of states opting out of the state exchanges — the vast majority of these states have Republican governors. Our study, while not representative, found that political environments did play a prominent role in state progress, although states of differing political orientations had been highly engaged in the process of considering state exchange development. The report concludes:

In the 10 states we studied, we found state policymakers, their staffs, stakeholders, and consumer advocates to be highly engaged in the health insurance exchange policy discussions and development processes. By all accounts, each state was making concerted efforts to engage with a broad swath of stakeholder and consumer interests and allowing all perspectives to be heard.

Even among those opposing the ACA, there was considerable consensus that, if the law was to be implemented, the state’s specific interests would be best served if the exchange could be tailored to the state’s preferences as much as possible. However, many state policy environments remain politically contentious, and progress in exchange development has been slow for some of them as a result.

States not achieving significant milestones by now—for example, contracting with an IT vendor to develop exchange and Medicaid information systems, establishing an exchange entity and hiring staff, creating a time-limited process for making central design decisions—are unlikely to be able to establish a state-based exchange by late 2013, when open enrollment for January 1, 2014 will begin. States taking the slower path can work in partnership with the federal government to establish a federally facilitated exchange, perhaps moving to a state run exchange in the future. Even working with the federal government to jointly establish an exchange, states will have an array of policy options that will allow them to tailor their exchanges to their culture and preferences.