HHS Announces $1.5B in State Insurance Exchange Grants

Nearly a dozen states will share $1.5 billion in federal money to help build state insurance exchanges, a new marketplace created by the Patient Protection and Affordable Care Act, which will give millions of Americans access to health insurance by October.

Health and Human Services Secretary Kathleen Sebelius announced the grants Thursday, just days after announcing that the department will overlook the January deadline for states to determine whether they will set up their own insurance exchange.

This is an effort to woo more states away from having the federal government set up and run an exchange. There remains, however, the February 15 deadline for states to decide if they will partner with the federal government to run the exchanges.

In a statement, Sebelius said, "These states are working to implement the health care law and we continue to support them as they build new affordable insurance marketplaces. Starting in 2014, Americans in all states will have access to quality, affordable health insurance and these grants are helping to make that a reality."

Six states will receive Level One Exchange Establishment Grants; North Carolina stands to get the largest share:

1. Delaware:  $8.5 million
2. Iowa:  $6.8 million
3. Michigan:  $30.6 million
4. Minnesota:  $39.3 million 
5. North Carolina:  $73.9 million
6. Vermont:  $2.1 million

Most of the states receiving a Level One grant, which is money awarded for one year, will spend it on consumer education and awareness, including in-person assistance programs.

North Carolina says it also plans to invest in IT infrastructure, as does Minnesota. Nearly all of the Level One grants also went to states that have decided to partner with the federal government to run their health insurance exchanges. Only Minnesota and Vermont will set up state-run exchanges.

In contrast, all five states awarded Level Two Exchange Establishment grants, which last for more than a year, are setting up state-based exchanges. The amount awarded with Level Two grants is also much larger.

1. California:  $673 million
2. Kentucky:  $182 million
3. Massachusetts:  $81 million
4. New York:  $185 million  
5. Oregon:  $226 million

Just as the states receiving Level One grants, the Level Two states say they will use the money to increase consumer awareness and invest in infrastructure.

California officials say it will use its massive $673 million grant to accomplish nine goals for its exchange, 'Covered California,' which includes hiring an outside vendor to help small businesses choose a health insurance plan, and building a "multi-site customer service center."

Oregon's $226 million grant will go to similar efforts, though state officials were more specific about some of their plans on how its exchange will be run. For example, Oregon will run its own service call center, and advertise the exchange with materials that focus on visual images and "fewer words," to accommodate its plan to have promotional media translated into three or four languages.

The insurance exchanges won't insure people until 2014, but they need to be ready for open enrollment in October, which is just nine months away.

This isn't the first time these states have received a federal grant aimed at insurance exchanges.

HHS started handing out grant money in 2010; nearly all states have received some funds to study the feasibility and challenges of setting up exchanges. Alaska is the only state without any financial awards because it didn't apply for any of the grants.

States may continue to apply for grants to help run the insurance exchanges through 2014. After that, the exchanges will be funded through an administrative tax on health plans.

So far, 25 states have decided to let the federal government set up and run their insurance exchanges, though states can decide at any time to ease out of that decision and instead partner with the federal government.

There is one state whose insurance exchange leadership has yet to be decided. Two Mississippi officials—Governor Phil Bryant and Insurance Commissioner Mike Chaney—are at odds over having the state run its own exchange.

Chaney wants the state to carry out its plans to run one and sent in Mississippi's application to federal officials, though they have held off granting approval. Chaney went so far as to have the state's attorney general weigh in on the issue. The Clarion Ledger reports the AG issued an opinion stating the insurance commissioner does have the right to create and run an insurance exchange.