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Former HHS Secretary Leavitt Says Most States Aren’t On Track To Meet Exchange Deadline

Most states are not on track to make the Jan. 1, 2014, deadline for building health insurance exchanges set by the federal overhaul law, said former Health and Human Services Secretary Michael O. Leavitt.

With many of the 2011 state legislative sessions wrapped up, “I don’t know any that are far along” on implementing exchanges, Leavitt told Kaiser Health News in an interview.

Former HHS Secretary Leavitt Says Most States Aren't On Track To Meet Exchange DeadlineLeavitt (Photo by Jessica Marcy/KHN)

“If you count back from 2014, the clock is running out,” said the former Utah governor who served as HHS secretary in the George W. Bush administration and now runs a health care consulting company.

Leavitt, whose home state already has a prototype of the exchange, said he believes most states will need at least a couple legislative sessions to work out the details of running an exchange, and therefore “deadlines will end up being elongated.”

The exchanges, a centerpiece of the 2010 federal health law, are web-based marketplaces where consumers and small businesses can compare and purchase policies. States are required to have them operational by 2014. If they don’t, the federal government will step in to build it for them.

But the exchanges have become a politically charged issue in many states, especially among conservatives opposed to the health law. Many Republican officials have been conflicted about whether to ignore the requirements or to go ahead with planning exchanges to fend off the federal government.

Leavitt’s been telling states that the federal government would not likely step in if it could avoid it, deferring to the states.

Only two states currently have exchanges-Utah and Massachusetts-and they are strikingly different. Massachusetts’ exchange actively regulates insurers in the state, while Utah’s is more like a directory of health plans that helps organize the market.

Legislatures and governors in fewer than half of the states have authorized exchanges, and even in some front-runner states such as California, progress has been slow, he said. California passed its law last autumn, but officials didn’t appoint all the board members who will actually oversee the building of the exchange, until this week.

Over the past year, Leavitt’s consulting firm, Leavitt Partners, has been advising companies and state legislatures on how to create exchanges. “States are hungry for information,” he said.

He also believes that even if the courts or Republicans succeed at unraveling the law, companies and states are likely to keep moving ahead with exchanges because they recognize that individual insurance shoppers and small businesses have long been at a disadvantage, lacking the negotiating power of large companies that can demand better prices. Also, insurers have relied on agents and brokers to reach individual customers, and because of other health law regulations, they’re cutting back on commissions.

“Any number of events could interrupt” the development of exchanges, he said. “But, we’d still have the problem of pooling [customers to create leverage for better prices]. And we have a distribution system that is more expensive than we can afford.”

Leavitt’s company is invested in exchanges. Leavitt Partners hired two former government officials who helped build the Utah exchange soon after the federal health law passed and he’s increasingly gotten into the business of advising on the projects.

Steven Auerbach, the president of Orlando, Fla., information technology firm Connextions, joined the former secretary Thursday for meetings with D.C. media and lawmakers. Connextions and Leavitt Partners announced an alliance earlier this month and the two firms have been working together to advise states and companies on exchanges. Auerbach said his company is “in the early stages” of a potential contract with Indiana.

Leavitt Partners is providing “high-level strategic advice” to Connextions, but will not join Auerbach’s firm in pursuing a deal with Indiana, said Brett Graham, a managing director at Leavitt Partners. Auerbach declined to name other clients.

This story was corrected on July 1. An earlier version implied that Leavitt was joining Auerbach in pursuing work for the state of Indiana.