Under federal health care reform requirements states must create an online health insurance exchange marketplace that will allow individuals to compare insurance policies. States that do not create their own customized exchange will have one created and managed for them through the US Department of Health and Human Services.

States have until 2013 to create and implement their own exchange. Exchanges must be online by 2014 either in a customized or generic, federal format. These are some of the shortest deadlines for build-out of this type in recent history, but the administration has signaled that it wants states to move quickly to implement reform.

Several states opposed to the measure have opted out of creating an exchange claiming a variety of reasons from not wanting to use federal money, to overall constitutionality. The Supreme Court is expected to rule on the constitutionality of the law this year. However, states that have chosen to build an exchange have a limited window to create a plan and submit it for federal grant funds to support the creation of the exchange. Any unused funds will be reallocated once the deadline expires in 2013.

Nebraska and Ohio are the first of several states to take up measures in this new legislative cycle but they face a race to the finish line if they intend to use federal dollars to build their exchanges.

Nebraska is one of the states involved in the court challenge. Governor Dave Heineman has said he would like to see the law repealed, but is moving forward with designing a system, “to protect Nebraska from a federal takeover.” The Nebraska plan focuses its exchange on policies for individuals and small businesses.

Democrats in the Ohio legislature have proposed a similar plan, and while Governor Kasich is moving forward on examining the exchange he has said, democratic efforts in the state are premature. State lawmakers want to take advantage of federal funds to build the exchange but those applications require that a plan is in place. State legislators have also pointed out that they have no desire to allow federal takeover of the state exchange.

According to a piece in The Plain Dealer, Lt. Gov. Mary Taylor, who oversees the Department of Insurance, has said she will “do everything I can to protect Ohio’s citizens and job creators from this catastrophic law.”

When federal health care reform was passed in 2010, the federal government provided a plethora of grants and loans to the states in order to help them meet the new state requirements outlined in the law. However, many of these funds were one-time capital infusions that expired if unused or on a given deadline. Some were meant to last longer than that, but still required that congress appropriate money each year manually through the budget process. Now, because congress has failed to pass a budget, and is instead working on serious of rolling temporary extensions, programs started using funds that have to be reappropriated manually each year are on the chopping block for cash strapped states.

One such casualty is in Texas, which is closing its Consumer Health Assistance Program less than one year after its creation due to the lack of of a federal budget measure. The program was created through grant funding provided as a result of health care reform. The program employed nine people who handled questions from citizens who were trying to determined what health insurance they qualified for under new and existing laws. But, without more money from the federal government and no indication when any might be forthcoming, the office will be closed. Citizen calls will be forwarded to the state department of insurance which handles all insurance related questions and does not maintain a specific health care related hotline.

Community health clinics, which provide care to mostly uninsured individuals have also faced steep cuts nationwide both through budget cuts and a failure to manually reauthorize funding. The failure of congress to provide a permanent answer on “doc fix,” through the budget also means that Medicare is no longer a guaranteed revenue stream for health care providers and may face a 24% cut.

In Maine, the Governor has proposed removing more than 65,000 people from MaineCare a health care program for low-income residents. The proposal also includes a measure that would close several assisted living facilities leaving another 5,000 people to look for a new residence in order to close a budget gap.

Health care is one of the biggest, if not the biggest chunk of most state budgets. The longer that federal funding remains uncertain, more of these programs will likely close or stall out before they begin as cash strapped states try to meet existing obligations.

According to King, that decision will impact benefits offered on all types of insurance policies. By giving states more choices in terms of the benefits offered, they will be able to fully customize their insurance exchanges. However, the decision also adds additional requirements to an already short build out timeline.

In Oregon, a nine person public corporation will decide the benefits offered on the state’s exchange. The corporation will also be responsible for establishing a business plan and leading the development of the exchange. The corporation has indicated it will move forward on the business plan despite the lack of federal guidance on benefits offerings.

The state legislature is currently looking at legislation that would require insurers to rate their benefit plans according to a three tiered system – bronze for a minimum 60 percent of benefits, silver for 70 percent, gold for 80 percent and platinum for 90 percent. The legislation would require insurers to offer at least one silver and one gold plan.

Required types of insurance coverage vary widely from state to state. But there are some core benefits that are required throughout most of the country, observers predicted that these core benefits would drive the creation of a national standard but the administration has opted to give states more leeway as a way of dealing with objections from several states about the implementation of federal health care reform. The Supreme Court is expected to rule on court challenges from some of these states in mid-2012.

In Oregon, implementing a health insurance exchange is an issue that has been on the table even before federal requirements. The state is making big strides in getting more of its residents insured, including providing more options for lower income residents. The state accepted federal grants to support both the exchange and some of these new programs and intends to implement an exchange even if the Supreme Court overturns provisions in health care reform when it takes up the issue. King and other state health officials have noted that any ruling would more or less impact how the exchange and other programs are funded, not whether they would cease to exist.

The bill was the result of work from the statehouse to empower the state Insurance Commissioner to review rate increases for small business and ensure that policies are being priced fairly. The bill is targeted to small businesses with 50 or fewer employees and builds on authority granted to insurance commissioners outlined in the federal health care reform law.

The Pennsylvania Insurance Commissioner has been reviewing rate increases in-state and in seven states nearby which do not monitor rate increases to ensure the overall fairness of the market.

The bill follows on moves from the state Insurance Commissioner who launched an investigation last year into excessive rate hikes. Investigations are still ongoing into two insurers in the state which are proposing rate increases of over 10%. Other states are also undertaking similar measures. Virginia also provides multi-state rate reviews and New York recently ordered insurers to refund millions of dollars in overcharges.

The Insurance Commissioner will also review all rate increases proposed on individuals. A story in the Pittsburg Tribune notes that some in the state think that the bill didn’t go far enough in addressing rate increases. Some advocates argue that all types of increases should be assessed- not just those over ten percent. The bill also leaves out rate hikes in large employer plans.

According to federal health care reform legislation, states have two options on health insurance exchanges – either create their own by the 2013 deadline and maintain control or become part of a large, generic exchange administered by the federal Department of Health and Human Services. Several states are challenging provisions of health care reform on the basis of constitutionality. The Supreme Court is expected to rule on these challenges in 2012. In this environment, several states with low levels of support for the law are holding off on building exchanges and fulfilling other state requirements until the ruling is final.

If the law is upheld in its current form by the Supreme Court, states that have held off will have a matter of months to implement their own state-run exchange before the January 2013 deadline. The federal government is offering states grant money to support the development of their own exchanges. Virginia has until June 2012 to apply for federal funding. Although, that still only leaves six months for funding to be applied and operational build-out to be completed.

Del. Terry Kilgore, R-Scott County, the chairman of the House Commerce and Labor Committee, has filed a request for “placeholder” legislation that could be used as a vehicle for creating a state-run exchange. Kilgore is one of the legislators concerned about giving control over to a federally administered exchange.

Governor McDonnell had appointed an advisory council which spent close to a year developing recommendations for the exchange including what types of plans and pricing should be available based on Virginia’s current insurance market. These recommendations would be lost with a federally administered exchange.

The Virginia Department of Health and Human Resources has said that despite the work of the council, too many questions remained unanswered to move forward and not enough guidance is coming from health officials in the Obama administration. Virginia Health and Human Resources Secretary Bill Hazel chairs the Virginia Health Reform Initiative Advisory Council. Some have speculated that Governor McDonnell’s support for Hazel’s stance plays into the Governors future political ambitions.

Under New York law, health insurers are expected to spend a minimum of $0.82 of each dollar paid in premiums on providing health care. This requirement is in addition to a new rule mandated by the Affordable Care Act which increases the amount spent on providing health care. In total, close to $0.90 of each premium dollar is to be spent on health care for policy holders. The remaining money can then go into administrative costs and profits for the insurer.

However, according to documents from the New York Department of Financial Services insurers consistently failed to meet the $0.82 requirement causing the Governor to order refunds.

“In this economic climate, every penny counts and, in this case, insurance companies were overcharging New Yorkers to the tune of millions of dollars,” Cuomo said in the statement. “This should serve as a message to companies that we are watching, and we will not tolerate any action that wrongly hurts the finances of the people of New York.”

Individuals and small businesses should start seeing refunds as early as next week while larger business plans will go out by mid-December. Insurers including some of the nations largest – such as WellPoint and Aetna are on the hook for overcharging. Refunds amount to millions split between the state’s 11 insurance providers.

Many of these same providers recently enacted premium rate hikes and were voicing strong opposition to a new state rule that would require public release of their rate filings. The Department of Financial Services noted that all insurers have recently withdrawn any formal opposition to the rule.

“While it is a positive that consumers are getting these payments, retroactive refunds are simply not good enough. It is likely that some people dropped their insurance coverage because of premium increases. Through the prior approval law, the Department of Financial Services is working to keep rates from spiraling out of control while also ensuring consumers get refunds when insurance companies don’t spend enough of premiums on medical care,” said Superintendent of Financial Services Benjamin M. Lawsky.

The coordinated care program is being piloted to determine best practices for helping elderly patients avoid expensive emergency trips to the hospital. The US Centers for Medicare and Medicaid Services (CMS) announced the pilot this week and will include 500 other health centers nationwide. Pilot participants will get $6 for each patient involved in the pilot.

According to CMS the money will go toward helping health centers make small improvements to how they handle care with chronic or log term health issues. The funds can be used for helping manage costs for extra services like phone and email advice which is often provided for free. Health providers in Montana plan to use the added funds to provide overall health system improvements.

The project will cost CMS $42 million for all 500 health centers. The results will be monitored by the CMS center for innovation which will issue a report at the end of the pilot.

State officials who asked for the cuts claim that by focusing on reimbursements they have preserved access to health care which they see as more critical. However, merely providing access doesn’t help residents already unable to afford care. California makes some of the lowest payments compared to states with similar programs and health care providers have noted that additional cuts will only exacerbate an already troublesome situation.

Rural health care providers and pharmacists are expected to feel the brunt of these cuts as more rural California residents are on Medi-Cal than those in more urban areas. Rural health providers and pharmacists are also often independent or with smaller practice groups unlike their urban counterparts which can spread the impact of the cuts thinly over a larger corporate practice structure.

The cuts are expected to be challenged in the court and may be successful – similar challenges blocked cuts in 2008 and 2009. The cut would save the cash strapped general fund over $600 million dollars but providers warn that despite claims to preserve access doctors and clinics may be cut in some of the neediest counties.

Health insurance exchanges have been one of numerous points of contention surrounding federal health care reform legislation. According to the requirements, states must create an online marketplace that allows consumers to compare the terms of health insurance policies available in their area. States that do not complete their exchange or refuse to create one will have an exchange created and managed for them at the federal level.

Several states have recently refused or returned federal funding to build their exchanges. Rhode Island was one of the first states to begin work on their exchange. The Governor recently issued an Executive Order which will make the state eligible for up to $75 million in federal funding to implement the exchange.

The Executive Order authorized the creation of the exchange, within the executive branch, under the guidance of an appointed advisory board led by former U.S. Attorney Meg Curran. “Moving forward with the Health Benefit Exchange is an important step in making affordable healthcare a reality in our state,” Governor Chafee said.

The state is expected to learn whether it has been awarded the second round of funding by December 2011.

The move to ask for federal funds is being opposed by members of the Governor’s own party within the legislature and may face several hurdles for approval. The application submitted by the governor requests $29.8 million to construct the exchange.

The administration said of the application that the state will continue to challenge the overall law, but on the chance that it sticks they want to be in compliance with regulations. Federal health care reform requires that all states create online marketplaces for consumers to compare insurance policies. Governor Brewer is trying to put her own spin on the exchange by focusing on what she calls “free market,” features. The Governor feels that this compromise will overcome opposition to a one-size-fits-all federally administered exchange.

Local lawmakers opposed to the application say that the Governor shouldn’t be contributing to the deficit by asking for funds for a law that may not be upheld and further that working against the legislature on this issue will only invite discord. The funding approval required in the statehouse isn’t likely to come up before 2013 but lawmakers which oppose the initiative plan to hold extensive hearings on the issue in the meantime.