Jan. 1, 2014, may seem like a long time from now, but as states scramble to establish health insurance exchanges mandated by the Patient Protection and Affordable Care Act (PPACA), that date constantly is on their minds.

Last week, the National Conference of State Legislatures (NCSL) released an update on how much progress states have made in setting up their exchanges. Some have thrown up their hands and said that they choose to let the federal government run their exchange. Some, despite their involvement in a lawsuit to block the federal healthcare reform law, are still moving forward with implementation. And others are politically supportive of the law and are currently developing their exchanges.

According to NCSL's analysis, 30 states and the District of Columbia have enacted an executive order or legislation that lays the groundwork for developing an exchange. Most other states have at least formed a task force to explore options. And 28 states plus D.C. have received Level I establishment grants from the U.S. Department of Health and Human Services (HHS) to implement their plans. Eleven of those states are participating in the 26-state lawsuit that alleges the PPACA is unconstitutional. Alaska has pledged to form its exchange without federal funding. Arkansas and Louisiana have opted for a federally run exchange.

Joy Wilson, health policy director at NCSL, told Governing that the process of developing exchanges is defined by unanswered questions: Has HHS released enough information to create an exchange? What if the Supreme Court finds the PPACA unconstitutional? What would an exchange governing board look like? How will the exchanges be funded after federal money expires?

"Everything is a gamble," Wilson said. When the PPACA passed in 2009, the 2014 deadline "seemed eons away," she added. "But upon reflection, it's an aggressive timetable."

To be ready for Jan. 1, 2014, state exchanges must be certified by Jan. 1, 2013, by HHS, although the department has indicated that states, if they choose, could gradually transition from a federally run exchange to a state-operated model at a later date. With a little over a year before certification begins, the states seem divided about how the federal government has handled its role in helping states to develop their exchanges.

Rhode Island Lt. Gov. Elizabeth Roberts told Governing that HHS has been committed to facilitating collaboration between states. "It's been a very open and collaborative partnership," she said. "They've showed a willingness to support states, and that hasn't always been true."

On Dec. 7 and 8, according to HHS, the department held a series of meetings with representatives from low-population states -- New Hampshire, Rhode Island, Vermont, Delaware, District of Columbia, Hawaii, Montana, South Dakota and Wyoming -- to discuss what practices they might share to aid in developing their exchanges. Other meetings for similarly situated states could take place in the future, according to HHS, in an effort to promote cooperation.

Rhode Island was the first state (and so far the only) to receive a Level II establishment grant, worth $58.5 million, for its exchange that was established by Independent Gov. Lincoln Chafee via executive order in September. The state's focus is on creating a user-friendly exchange that makes the insurance information understandable for the average consumer. It has tested the online exchange's interface with the state chamber of commerce and designed the site so that the complicated informational structure is hidden from the user, Roberts said.

In a different approach, Republican Gov. Bobby Jindal of Louisiana announced last March that his state had chosen to have the federal government run its exchange as the state sues to overturn the PPACA. Bruce Greenstein, secretary of the Louisiana Department of Health and Hospitals, told Governing that this decision was made because the administration "believes the [PPACA] and insurance exchanges are unconstitutional... and just flat-out bad policy."

Greenstein alleged that there was an "overwhelming bias for HHS to push states to build [the exchange] themselves," yet states "still don't know what it's really supposed to look like." He asserted that the exchange would give consumers fewer options and therefore drive costs up. His office's hope is that the law will be repealed, Greenstein said.

Michigan is trying to take a hybrid approach of suing to overturn the PPACA while setting up its own exchange. Yet politics have muddied that effort, a reflection of the delicate line that lawmakers in some states must walk when approaching the controversial law.

Republican Gov. Rick Snyder has voiced his support for creating an exchange. The state applied for and received a $9.8 million Level I establishment grant. Republican state Sen. James Marleau introduced a bill in September to establish the exchange, which passed the Senate last month. But the Michigan House voted last week to remove the establishment grant from a funding bill, essentially delaying any further development.

Ari Adler, spokesman for House Speaker Jase Bolger (R), told Governing that the House wanted to wait for the U.S. Supreme Court's ruling on the PPACA's constitutionality before creating an exchange. "Since we are a plaintiff in that case, it does not seem logical to take money from that system," Adler said, adding that Republicans believe their constituency doesn't want Michigan to participate in the federal health care law.

If the law is upheld -- a ruling is expected in summer 2012 at the earliest -- Michigan would have limited time to create an exchange ready for enrollment in October 2013. The Republican caucus of the Michigan House "is comfortable with that timetable," Adler said. They also expect to be able to receive the federal funding if they choose to move forward. HHS confirmed that Michigan could still collect the Level I establishment grant at a later date because that money doesn't require legislation establishing an exchange. However, Level II establishment grants, for which the next application deadline is June 29, do require such legislation.

Marleau told Governing that he was "a little disappointed" with the House's vote. He acknowledged that the political maneuvering was challenging; a new contingent of House members, largely supported by the Tea Party, was elected in 2010 and are strongly opposed to any kind of participation in the federal health care program, he said. "The House is going to have to wake up," Marleau said, asserting that their action could delay the state enough that it would be forced to have a federally run exchange.

The Michigan exchange Marleau proposed would have no impact on the attorney general's ability to partake in the lawsuit, he said. The marketplace is designed to function regardless of whether the PPACA is upheld or reversed. It would not be a part of the state government, instead functioning as a self-funded non-profit entity. The exchange would be funded by unspecified user fees charged to insurance companies, according to the bill.

No businesses or individuals would be required to buy insurance through the Michigan exchange. Board members would be restricted from receiving any financial benefits from insurance companies or healthcare providers, and they would appoint their successors, excluding the board from political influences, Marleau said. The initial board would be appointed by the House Speaker, the Senate Majority Leader and Snyder. And if the PPACA is found unconstitutional, the marketplace would stay in business as the market dictated, he explained.

The House's actions and 2014 deadline have made the exchange development process a difficult one, Marleau said. "We're backed up against the wall," he said. The looming deadline "doesn't give us much time."

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