Source: https://www.yalelawjournal.org/forum/health-care-exchanges-and-the-disaggregation-of-states-in-the-implementation-of-the-affordable-care-act
Timestamp: 2019-04-24 04:03:28+00:00

Document:
Federalism scholarship and doctrine have long viewed the states as monoliths.1 It is New York that is commandeered,2 Florida’s sovereign immunity that is violated,3 and Indiana that is coerced4—not officials, agencies, or political parties within the state, but the state qua state. We assume that the federal government does not see the politically contested underbellies of the states, but instead neutrally waits for the conflicts between a state’s governor and legislature, agencies and lawmakers to be resolved before listening for a unified voice. But what happens when the federal government not only sees, but intervenes in, these intrastate political contests? Elsewhere I have argued that federalism theory and doctrine struggle to conceptually accommodate this kind of intervention.5 And yet it remains pervasive. The federal government often disaggregates the states when seeking their consent to join cooperative programs.6 It does this by, among other things, designating a particular state official who can speak for the state.7 The federal government also disaggregates the states in the implementation of cooperative programs, seeking out state officials who are willing to lend a helping hand to the federal effort even as other state actors resist.
This kind of disaggregated collaboration has important theoretical implications because it complicates the paradigm of cooperative federalism as engagement between unified sovereigns. But in the Affordable Care Act (ACA)—one of the largest and most complex cooperative programs ever established—we also see a more immediate and practical significance of the practice of disaggregation. Here I focus in particular on the way that disaggregation shaped the creation of the health insurance exchanges that form the centerpiece of the Act.
My goal in this short Essay is to document and explore the significance of these acts of disaggregation. By explaining how the various exchange models came to be, Part I shows how HHS’s shift from collaborating with governors to collaborating with insurance commissioners richly refutes the idea that the federal government is blind to intrastate politics. This case study therefore challenges some of the long-standing theoretical assumptions animating cooperative federalism. But HHS’s variety of exchange models may have more pressing implications in light of the ongoing litigation in King v. Burwell,17 which will decide the fate of the exchange scheme later this month. As I will show in Part II, that case reveals the difficulty of mapping the practice of disaggregation onto the text of federal statutes and the principles of federalism doctrine. It shows, in other words, some of the risks and possibilities of disaggregation.
After the ACA’s passage, HHS immediately began helping the states establish exchanges.18 But, almost from the beginning, it was clear that significantly fewer states than expected would elect to operate their own state-based exchanges. California was the only state to establish an exchange in 2010, the year the ACA was enacted.19 And by July 2011, only nine more states had expressed their intention to set up an exchange.20 These numbers were ominous to many in the administration, and for good reason.21 When the law passed, there was a widespread expectation that most of states would run their own exchanges.22 This expectation was so strong, in fact, that it was embedded in the funding Congress appropriated to support exchange development. While the Act allocated virtually unlimited funds to support the establishment of state exchanges,23 it squeezed the budget for federal exchanges, appropriating only one billion dollars to HHS to get the federal exchange up and running.24 HHS, therefore, had both a political and a financial incentive to encourage as much state participation in the administration of the exchanges as possible.
In early 2012, as battles like Mississippi’s bloomed across the country,28 HHS floated the idea of developing more flexible ways for eager state officials to participate in exchange administration. HHS’s initial effort would be its first hybrid model: the “State Partnership Exchange” (SPE). These exchanges delegate several important regulatory powers back to participating states.29 The guidance establishing them notes that SPEs give states the opportunity to “assume primary responsibility for many of the functions of the Federally-facilitated Exchange permanently or as they work towards running a State-based Exchange.”30 One of the biggest selling points of the SPE is that “states can continue to serve as the primary points of contact for issuers and consumers.”31 By allowing state officials to “provide input and guidance” into the otherwise federally facilitated exchange, the SPE model allows these officials to “take ownership over significant components of the [exchange’s] operation.”32 Finally, the guidance commits that even in “areas where the law prohibits HHS from completely delegating responsibility to a state, HHS will work with states to agree upon processes that maximize the probability that HHS will accept state recommendations without the need for duplicative reviews from HHS.”33 By establishing an SPE, in other words, states could retain important responsibilities while avoiding some of the political and financial consequences of running their own separate exchanges.
To accommodate insurance commissioners in states in which the governor declined to establish a state-based exchange or SPE, HHS developed a second hybrid exchange: the “Marketplace Plan Management” (MPM) exchange. In states that pursue an MPM exchange, state insurance agencies are responsible for providing recommendations regarding which “health plans meet QHP certification requirements.”38 HHS then commits to “rely” on these recommendations, “[a]ssuming a state continues to act in accordance with its attestations.”39 Thus, although the exchange was technically federally managed, state officials retain a meaningful role.
To pursue the MPM model, the state’s insurance commissioner need only attest to HHS that he or she had the authority under state law to perform the relevant oversight functions.40 Thus, a state insurance commissioner can initiate an MPM exchange without submitting a blueprint signed by the governor.
To date, seven states have elected to participate in a Marketplace Plan Management exchange.45 Tellingly, all but one of the letters expressing the state’s intention to participate came from the state’s insurance commissioner.46 Moreover, several insurance commissioners who opted for the MPM exchanges clarified that they were emphatically not embarking on formal state-based exchanges or SPE hybrid exchanges.47 Perhaps this is because six of the seven states participating in the MPM model were also led by governors who had publically announced their opposition to the establishment of a state exchange.48 Disaggregation, therefore, served its intended purpose—it allowed HHS to identify potential state collaborators and established pathways for their participation in the federal exchange project even in the face of political opposition within their states.
In implementing the exchange provision of the ACA, HHS took exactly the kind of step to which federalism doctrine and the theory remain blind. It disaggregated the states—first by identifying governors as the consent agent for the state exchanges, and then by developing ways to collaborate directly with state insurance commissioners who favored the exchange project even when their governors did not.
The ongoing litigation in King v. Burwell—which is awaiting a decision from the Supreme Court as this goes to press—reveals some of the ways that disaggregation, and the various exchange models it created, could complicate the interpretation of the ACA.
In both cases, HHS’s disaggregation illustrates that there are deeper challenges in defining a state than simply reading the words on the page. Understanding the dynamics of intrastate politics—and acknowledging the disaggregation that made the state and federal exchanges what they are—should complicate any reasoning in King that relies on a strict division between the “State” and the “federal.” For that decision must eventually reckon with the lived federalism born of the statute—the ways that state officials exercise diverse forms of power within the exchanges.
Still, this move is not without risks, in part because we have no doctrine to help us evaluate the legitimacy of disaggregation. In many respects, HHS is flying blind. One intuitive starting point would be to use the standard tools of administrative law to discern whether Congress authorized HHS to collaborate with individual state officials—whether they be governors in the first instance or insurance commissioners later on—in the way the agency has. We might ask whether Congress envisioned HHS working with the state as a unified entity or with a range of individual state actors. This approach is very possible: Abbe Gluck has shown that Congress often embeds novel forms of federal-state collaboration “inside of federal statutes.”55 And there is a growing trend of challenging agency action as inconsistent with a statute’s internal federalism logic. Perhaps, then, the question is whether the ACA itself endorses disaggregation and under what conditions.
But there might also be broader constitutional principles governing disaggregation. Some might see disaggregation running contrary to one of the fundamental premises of federalism—that federalism is a system of layered governments, not of layered officials.
Whether there are administrative or constitutional principles that could affect an agency’s ability to disaggregate the states is a question beyond the scope of this Essay, but it is a question that may soon call for an answer.
Bridget A. Fahey is a member of the Yale Law School J.D. Class of 2014. She thanks Abbe Gluck, Alex Hemmer, Matt Shahabian, and Reynold Strossen for helpful comments on previous drafts.
Preferred Citation: Bridget A. Fahey, Health Care Exchanges and the Disaggregation of States in the Implementation of the Affordable Care Act, 125 Yale L.J. F. 56 (2015), http://www.yalelawjournal.org/forum/health-care-exchanges-and-the-disaggregation-of-states-in-the-implementation-of-the-affordable-care-act.
New York, 505 U.S. 144.
42 U.S.C. § 18031(b) (2012).
45 C.F.R. §§ 155-57 (2012).
759 F.3d 358 (4th Cir. 2014), cert. granted, 135 S. Ct. 475 (2014).
See Guidance on the State Partnership Exchange, supra note 14, at 1.
See Blueprint, supra note 11.
Letter from Gary Cohen to Mike Chaney, supra note 27.
Keith & Lucia, supra note 15, at 13 exh.5.
For copies of these letters, see Technical Implementation Letters, supra note 36.
See Brief for Respondents at 13, King v. Burwell (U.S. filed Jan. 28, 2015) (No. 14-114).
42 U.S.C. § 18041(c) (2012).
See id. § 18041(a)-(c) (2012).
For a defense of such deference, see Fahey, supra note 5, at 1627-29.
For instance, it is common to see the terms “state official” and “state” used interchangeably. This imprecision has the perhaps unexpected consequence of suggesting that every time a state official acts, his or her actions can be attributed to the state itself. See, e.g., New York v. United States, 505 U.S. 144, 188 (1992) (“The positions occupied by state officials appear nowhere on the Federal Government’s most detailed organizational chart. The Constitution instead ‘leaves to the several States a residuary and inviolable sovereignty.’” (emphasis added) (internal citations omitted)); Larry Kramer, Understanding Federalism, 47 Vand. L. Rev. 1485, 1493 (1994) (“[T]he federal government needs states almost as much as the reverse, and this mutual dependence guarantees states officials a voice in the lawmaking process.” (emphasis added)); Neil S. Siegel, Commandeering and Its Alternatives: A Federalism Perspective, 59 Vand. L. Rev. 1629, 1691 (2006) (noting that state commandeering could create “public confusion [that] might allow state officials to reap some of the political rewards for popular federal regulations that the states had no hand in enacting or implementing.” (emphasis added)). But see Ernest A. Young, Executive Preemption, 102 Nw. U. L. Rev. 869, 880 (2008) (“State governments are not monolithic, and it is often a mistake to assume that one particular class of state officials will always represent the general autonomy interests of the state.”).
See generally Bridget A. Fahey, Consent Procedures and American Federalism, 128 Harv. L. Rev. 1561 (2015).
Ctrs. for Medicare & Medicaid Servs., Blueprint for Approval of Affordable State-Based and State Partnership Insurance Exchanges, U.S. Dep’t Health & Hum. Servs. 4 (2012) [hereinafter Blueprint], http://www.cms.gov/CCIIO/Resources/Files/Downloads/hie-blueprint-11162012.pdf [http://perma.cc/Y5HC-VWZF].
I call this type of disaggregation “agent-based” consent procedures. See Fahey, supra note 5, at 1573.
The term “partnership exchanges” has also been used informally in HHS letters and guidance documents to describe the two hybrid exchange models this Essay discusses.
Ctrs. for Medicare & Medicaid Servs., Guidance on the State Partnership Exchange, U.S. Dep’t Health & Hum. Servs. 1 (Jan. 3, 2013), http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/partnership-guidance-01-03-2013.pdf [http://perma.cc/S5CR-SCQD] (“Through a hybrid model . . . States may assume primary responsibility for many of the functions of the Federally-facilitated Exchange permanently or as they work towards running a State-based Exchange.”).
See State Health Insurance Marketplace Types, 2015, Kaiser Family Found., http://kff.org/health-reform/state-indicator/state-health-insurance-marketplace-types [http://perma.cc/5KQ5-2WPM]; see also Katie Keith & Kevin W. Lucia, Implementing the Affordable Care Act: The State of the States, Commonwealth Fund (Jan. 2014), http://www.commonwealthfund.org/~/media/Files/Publications/Fund%20Report/2014/Jan/1727_Keith_implementing_ACA_state_of_states.pdf [http://perma.cc/LWF3-P28X].
See Cal. Gov’t Code § 100500 (West 2015) (codifying the California Patient Protection and Affordable Care Act of 2010).
Sam Baker, States Slow in Setting Up Central Piece of Obama Healthcare Law, The Hill, July 6, 2011, http://thehill.com/blogs/healthwatch/health-reform-implementation/169761-states-lag-in-implementing-health-insurance-exchanges [http://perma.cc/E5BM-HH65]; Amy Goldstein & N.C. Aizenman, States Slow to Adopt Health-Care Transition, Wash. Post, June 5, 2011, http://www.washingtonpost.com/politics/health-care/states-slow-to-adopt-health-care-transition/2011/06/03/AGbZbjJH_story.html [http://perma.cc/3ZYJ-A6PX].
Robert Pear, States Will Be Given Extra Time To Set Up Health Insurance Exchanges, N.Y. Times, Jan. 14, 2013, http://www.nytimes.com/2013/01/15/us/states-will-be-given-extra-time-to-set-up-health-insurance-exchanges.html [http://perma.cc/4CLU-LEJC].
42 U.S.C. § 18031 (2012) (providing that “[t]here shall be appropriated to the Secretary, out of any moneys in the Treasury not otherwise appropriated, an amount necessary to enable the Secretary to make awards . . . to States” for use establishing exchanges (emphasis added)).
Id. § 18121(b). To put that amount in perspective, the Act also appropriated $925 million for grants related to exchange development in Puerto Rico alone. Id. § 18043(c).
Letter from Mike Chaney, Comm’r of Ins., Miss. Ins. Dep’t, to Gary Cohen, Dir., Ctr. for Consumer Info. & Ins. Oversight, Ctrs. for Medicare & Medicaid Servs., U.S. Dep’t of Health & Human Servs. (Nov. 14, 2012), https://www.mid.ms.gov/pdf/ExchDecLtr.pdf [http://perma.cc/DT3A-ZVLF].
Letter from Phil Bryant, Governon, Miss., to Kathleen Sebelius, Sec’y, U.S. Dep’t of Health & Human Servs. (Nov. 26, 2012), http://images.politico.com/global/2012/11/28/bryanthhsletter.html [http://perma.cc/QN2L-DKRL].
Letter from Gary Cohen, Dir., Ctr. for Consumer Info. & Ins. Oversight, Ctrs. for Medicare & Medicaid Servs., U.S. Dep’t of Health & Human Servs., to Mike Chaney, Comm’r of Ins., Miss. Ins. Dep’t (Feb. 8, 2013), http://www.cms.gov/CCIIO/Resources/Files/Downloads/ms-exchange-letter-02-08-2013.pdf [http://perma.cc/56UD-ZNQM].
New Jersey Governor, Chris Christie, for instance, vetoed the state legislature’s exchange legislation. See Kate Zernike, Christie Vetos Health Insurance Exchange, N.Y. Times, May 10, 2012, http://www.nytimes.com/2012/05/11/nyregion/christie-vetoes-health-insurance-exchange-for-new-jersey.html [http://perma.cc/EWM4-AZYV]. And in 2011, Pennsylvania Governor Tom Corbett overrode the Pennsylvania Insurance Department’s formal recommendation that the state establish a state exchange. See Pa. Insurance Dep’t, Insurance Exchange Planning (Nov. 21, 2011), http://www.paehi.org/_files/live/KMPG_REPORT_Nov_2011_Health_Insurance_Exhanges_Planning.pdf [http://perma.cc/W2BT-T99B]‎; Press Release, Pa. Office of the Governor, Governor Corbett Announces State-Based Insurance Exchange Decision (Dec. 12, 2012), http://www.portal.state.pa.us/portal/server.pt?open=18&objID=1305763&mode=2 [http://perma.cc/8BCL-BBCQ].
Ctrs. for Medicare & Medicaid Servs., General Guidance on Federally Facilitated Exchanges, U.S. Dept. Health & Human Servs. (May 16, 2012), http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/ffe-guidance-05-16-2012.pdf [http://perma.cc/5LAE-SGG7].
To access the letters submitted by each state, see Ctr. for Consumer Info. & Ins. Oversight, Technical Implementation Letters, Ctrs. for Medicare & Medicaid Servs., http://www.cms.gov/CCIIO/Resources/Technical-Implementation-Letters [http://perma.cc/5Z87-NUYW].
Ctrs. for Medicare & Medicaid Servs., Frequently Asked Questions: State Evaluation of Plan Management Activities of Health Plans and Insurers [hereinafter FAQ], http://www.cms.gov/CCIIO/Resources/Files/Downloads/plan-management-faq-2-20-2013.pdf [http://perma.cc/LG57-B4CB].
Letter from Sandy Praeger, Comm’r of Ins., Kan. Ins. Dep’t, to Gary Cohen, Dir., Ctr. for Consumer Info. & Ins. Oversight, Ctrs. for Medicare & Medicaid Servs., U.S. Dep’t of Health & Human Servs. 1 (Feb. 15, 2013), http://www.cms.gov/CCIIO/Resources/Technical-Implementation-Letters/Downloads/ks-exchange-letter-2-15-2013.pdf [http://perma.cc/5FFT-MPLY].
See, e.g., Letter from Merle Scheiber, Dir., S.D. Div. of Ins., to Gary Cohen, Dir., Ctr. for Consumer Info. & Ins. Oversight, Ctrs. for Medicare & Medicaid Servs., U.S. Dep’t of Health & Human Servs. (Mar. 11, 2013), http://www.cms.gov/CCIIO/Resources/Technical-Implementation-Letters/Downloads/sd-exchange-letter-03-11-2013.pdf [http://perma.cc/D4TX-RVTL] (noting that South Dakota is agreeing “to conduct plan management functions on the federal exchange without taking part in what HHS has termed the “State Partnership Insurance Exchange Model”); Letter from Monica J. Lindeen, Mont. Comm’r of Sec. and Ins., to Gary Cohen, Dir., Ctr. for Consumer Info. & Ins. Oversight, Ctrs. for Medicare & Medicaid Servs., U.S. Dep’t of Health & Human Servs. (Feb. 26, 2013), http://www.cms.gov/CCIIO/Resources/Technical-Implementation-Letters/Downloads/mt-exchange-letter-2-26-2013.pdf [https://perma.cc/A7D4-RJZH].
See, e.g., Joanne Young, Heineman Opts for Federal Health Care Exchange, Lincoln J. Star (Nov. 15, 2012), http://journalstar.com/news/state-and-regional/statehouse/heineman-opts-for-federal-health-care-exchange/article_c8b80018-c57b-52c7-807c-807535e3533a.html [http://perma.cc/5WB4-4KBX] (Nebraska); Press Release, Office of Governor John R. Kasich, Ohio Says No to an Obamacare Health Exchange, http://www.governor.ohio.gov/exchange.aspx [http://perma.cc/3KRY-XARM] (Ohio); Press Release, Office of Governor Dennis Daugaard, South Dakota Will Not Build Health Insurance Exchange (Sept. 26, 2012), http://news.sd.gov/newsitem.aspx?id=13607 [http://perma.cc/RZ72-4BXY] (South Dakota).
Nat’l Conf. State Legislatures, Insurance State Regulators—Selection and Term Statutes (Apr. 12, 2013), http://www.ncsl.org/research/financial-services-and-commerce/insurance-state-regulators-selection-and-term-stat.aspx [http://perma.cc/32Z4-XLPC].
Abbe R. Gluck, Intrastatutory Federalism and Statutory Interpretation: State Implementation of Federal Law in Health Reform and Beyond, 121 Yale L.J. 534, 542 (2011).

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