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July 2011 St@teside

State Roundup: Health Benefit Exchange Legislation

Mid-way through 2011, states are continuing action toward creating health insurance exchanges. According to the Kaiser Family Foundation’s new exchange legislation tracker, Exchange Monitor:

  • 10 states have enacted legislation establishing a state-based exchanges,
  • Two states—Mississippi and Wyoming—have passed legislation to study the feasibility of establishing an exchange, and
  • Three states—Illinois, North Dakota, and Virginia—have passed legislation that expresses intent to create exchanges.

Failed legislation in Alabama, Georgia, and Indiana resulted in Governors signing executive orders to study the feasibility of an exchange or declare the intent to establish one within the state. Rhode Island is considering establishing an exchange through an executive order after its legislation failed due to an inability to agree on abortion-related language.

State Roundup


Connecticut’s bill establishing the Connecticut Health Benefits Exchange was signed by Governor Dan Malloy July 1. The bill establishes an exchange board composed of 11 members. The legislation also appoints a "SustiNet cabinet" that is responsible for determining whether a publicly administered health plan option is advisable and how it should be implemented. The board is also charged with making a recommendation about whether to implement the Basic Health Program option of the ACA. State leaders are currently considering appointments to the board; the first board meeting will be scheduled by the chairperson no later than August, 1, 2011.


On July 8, Governor Neil Abercrombie signed legislation (S.B. 1348) establishing an exchange structured as a private, nonprofit entity. The legislation creates a 15-member board of directors appointed by the governor, an interim board to recommend policies and procedures to implement the governance of the exchange, and it appropriates money out of the federal exchange planning/establishment grant funds to support the operations of the interim board. State legislation will permit but not require insurers and/or brokers to serve on the board. The bill also directs the state to spend $750,000 of federal funds on the interim board operations for fiscal year 2011-2012.


On July 14, Governor Pat Quinn signed legislation expressing intent to establish an exchange. The Illinois Health Benefits Exchange is scheduled to operate by October 1, 2013. The legislation (S.B. 1555) authorizes the state to accept and allocate federal funding and create a Legislative Study Committee.

The Legislative Study Committee will consist of six state senators and six house representatives who will have to make their recommendations for how to set up an exchange by the end of September 2011.

New Hampshire

The New Hampshire legislature has indicated concern about the establishment of a state-based exchange through two recently passed bills. House Bill 601 sets up a legislative committee to supervise the state insurance commissioner’s implementation of the ACA and mandates him to refuse $666,000 in federal money to set up an exchange. The commissioner of health and human services must also obtain the committee’s approval before initiating any rule or waiver request under the ACA. Senate Bill 148 expresses that no New Hampshire resident (except an enrolled college student) is mandated to obtain health insurance nor can they be assessed a fee or fine for failure to obtain health insurance. Both bills were allowed to become law without Governor John Lynch’s signature.

Rhode Island

The Rhode Island legislature was unable to pass exchange legislation before its session ended on July 1, due to failed negotiations related to abortion language written into the Senate version of the bill. Because Rhode Island Governor Lincoln Chafee is still supportive of a Rhode Island-based exchange, he plans to establish an exchange through an executive order. On July 18, the Rhode Island Health Care Reform Commissions’ Executive Committee recommended that, via an executive order, the entity under which the exchange will be housed will be in a new division under an existing department. The existing department still needs to be determined.

The committee is chaired by Lieutenant Governor Elizabeth Roberts and is a cabinet-level group charged with health reform implementation. The decision to pursue an executive order was made after an input session from stakeholders including providers, consumer advocates, insurers, and members of the public. Governor Lincoln Chafee does not have a deadline to issue the executive order, but if the state wants to apply for a Level Two grant by September 30, a decision will need to be made quickly.

Summarizing Exchange-Related Work across States

Eight of the 10 states that have enacted legislation to establish exchanges since the passage of the ACA are planning to establish a quasi-governmental governance structure—California, Colorado, Connecticut, Maryland, Nevada, Oregon, Washington, and West Virginia. Vermont plans to have a state agency operate the exchange, while Hawaii’s exchange would be operated as a nonprofit organization.1

States have also addressed conflict of interest on exchange governing boards.

  • Six states have language that prohibits insurers or agents/brokers from serving on the exchange board—California, Connecticut, Maryland, Nevada, Vermont, and Washington.
  • Three states—Colorado, Hawaii, and Oregon—permit but do not require insurers and/or brokers to serve on the board. Each state has provisions that prevent any board member from participating in votes in which they have a financial conflict of interest. The states are still deciding on the details of those provisions.
  • One state—West Virginia—requires insurers and agents/brokers to serve on the board.2

According to the U.S. Department of Health and Human Services, 10 states submitted letters of intent to apply for the June 30 deadline for the Level One Establishment Grant. Level One grants provide one year of funding to states that have shown progress in setting up their exchanges. The next Level One deadline is September 30, which also serves as a the first deadline for states to apply for a Level Two Establishment Grant. The Level Two grants provide funding to states that have met benchmarks such as:

  • Legal authority to establish and operate an exchange compliant with federal requirements;
  • Exchange governance structure;
  • A budget and initial plan for financial sustainability by 2015;
  • A plan outlining steps to prevent fraud, waste, and abuse; and
  • A plan describing how consumer assistance capacity will be created.

1Center on Budget and Policy Priorities. (2011, July 5). Analysis of State Health Insurance Exchange Legislation: Establishment Status and Governance Issues. Retrieved July 21, 2011 from