Gov. Tom Corbett on Wednesday said the state will not set up or run an online health insurance marketplace in Pennsylvania, citing concern over millions in costs and rules that could be placed on the state.
The decision means the federal government will operate the state’s marketplace — known as an exchange — as it will in 28 other states.
“It would be irresponsible to put Pennsylvanians on the hook for an unknown amount of money to operate a system under rules that have not been fully written,” the Republican governor said in a statement.
Exchanges are a key provision of President Obama’s health care law to expand insurance coverage to millions of Americans. The law requires exchanges to be operating in all 50 states by Oct. 1 so that individuals and small businesses can buy health insurance for 2014.
State Insurance Commissioner Michael Consedine, who was charged with exploring whether the state should run an exchange, told the Tribune-Review that Pennsylvania taxpayers could have spent $30 million to $50 million a year to run a state-based exchange.
“Absolutely it would have been more costly” than letting the federal government handle it, he said.
The state won’t be completely off the hook for some expenses, Consedine said. It will have to upgrade some information technology systems to communicate with systems in Washington, he said.
The Insurance Department likely will be hit with more insurance products and new rates to review, which will require additional manpower.
“Generally, we will continue to be the regulator of our insurance marketplace,” Consedine said. “The companies that offer products on the exchange, they’ll still be subject to our regulations.”
Even though Pennsylvania won’t directly bear the cost of the exchange, the Department of Health and Human Services has proposed funding federally-run exchanges through a 3.5 percent levy on insurance premiums, a cost that insurance buyers likely will pay.
The state’s residents will have access to an exchange, but Democratic Rep. Dan Frankel of Squirrel Hill said it’s unfortunate that Corbett, who opposed the health care law known as the Affordable Care Act, “dragged his feet” on implementing the exchange, hoping the Supreme Court would overturn it or Congress would repeal it if Obama lost the election.
“It’s now the law, and we should be doing everything to comply with the law,” Frankel said.
Frankel said the state will have to return $33.8 million in federal money it received to set up an exchange.
The state spent none of that money, said Consedine, who added he’s exploring ways the state could hold onto the money to offset future exchange costs.
The Pennsylvania Health Access Network, a statewide coalition of groups that advocated for a state-run exchange, lamented Corbett’s decision.
The network’s project director, Antoinette Kraus, said the state’s residents will still receive the benefits of an exchange.
“Either way, Pennsylvania families and small businesses will finally have access to quality, affordable coverage through this new marketplace on Jan. 1, 2014,” she said.
Americans for Prosperity applauded Corbett’s decision, after a year of urging him to reject a state-run exchange.
“On behalf of our more than 120,000 activists, and, most importantly, our children, we thank the governor for standing strong against the president’s intrusive and burdensome health care law,” said Jennifer Stefano, Pennsylvania state director of the group.
Stefano said the group opposed a state-run exchange because Pennsylvania would have had little control in deciding how it would be run. “What the law did was leave the state with the bill,” she said. “Even if the state set it up, the state had zero discretion to change it.”
Although Corbett rejected a state-run exchange for 2014 and 2015, officials could decide later to take control of the marketplace.
“The governor has left the door open to consider a transition later,” Consedine said.
Highmark Inc., the state’s largest health insurance company, said in a statement that it was glad to have a decision after months of speculation.
“The administration’s announcement today provides needed clarity for all health care stakeholders preparing for reform,” the nonprofit insurer said. “Since the Affordable Care Act became law, Highmark has been working to comply with the regulations and will be offering products on the exchanges.”