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More States Taking Federal Funds For Insurance Exchanges

Despite widespread opposition to the 2010 health law, a majority of states have now accepted federal funding to establish their own health insurance exchanges.

The Department of Health and Human Services today announced nearly $220 million in new grants to 13 states.

HHS also pushed back by six months the deadline for applying for level-one grants, from Dec. 30 to June 29, 2012, accommodating requests from several states where the issue will be up for legislative discussion.

Exchanges will provide an in-state, online marketplace for consumers and small business owners to compare and purchase insurance plans, with the hope of driving down costs through competition.

Twelve of the grants are for single-year, so-called “Level One” funding. States do not have to commit to an exchange for this type of grant. State officials do, however, agree to make a serious investment toward implementing an exchange in the future.

Twenty-eight states, plus the District of Columbia, have received level-one grants. Eleven of those states – 10 with Republican governors — are suing the federal government to overturn the health law. The Supreme Court is expected to rule in the case next year.

The exchanges are to open for business in January 2014. Some state officials have warned it may be difficult to be ready by then. HHS must approve states’ exchange plans by Jan. 1, 2013.

In another sign that exchanges are still moving forward, HHS awarded Rhode Island the first-ever “Level Two” grant. This funding, which encompasses multiple years, does require an exchange commitment from the state. Other states are expected to apply within the next year, HHS officials said.

According to Chiquita W. Brooks-LaSure, director of coverage policy for HHS, Rhode Island will use its $58.5 million grant to continue building its IT capabilities, staffing and other infrastructure for the exchange.

Brooks and Sebelius characterized exchanges as a “bipartisan concept” and encouraged lagging states to move forward. The federal government is empowered by the health law to launch exchanges in states that don’t do so.

Overall, 49 states and the District of Columbia have received at least an exchange planning grant, preceding level one; three have returned at least a portion of the money. Only Alaska didn’t apply for a grant.