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The Curtain Rises On The Fourth Act: States’ Evolving Responses To The Affordable Care Act



May 31st, 2012

Editor’s note: For more on the potential impact of the Supreme Court’s Affordable Care Act ruling on states, see Sonya Schwartz’s Health Affairs Blog post.

As we anticipate release of the Supreme Court’s decision on the Affordable Care Act, we can look back at how states have responded thus far to the ACA in order to anticipate what may come next.  States’ responses have unfolded in three acts, and when the Court’s decision arrives we will see the opening of Act IV.  For a visual representation of the four acts, click here.

Act I: Cautious Consideration

Act I, which ran from the bill signing through the end of 2010, was characterized by states’ cautious consideration of their many options.  States faced immediate decisions, such as whether to modify an existing high risk pool or defer to the federal government’s pre-existing condition insurance plan.  States began grappling with the changes in state law and regulation that might be required to comply with new federal health insurance standards.  States also began considering the relative merits of creating a health insurance exchange or leaving that task to the federal government.

Despite significant divergence of opinion regarding the merits of the law, the most striking feature of this period was the methodical nature of states’ consideration of their options.  In many states, leaders understood that decisions on specific items should be guided by an overall approach to implementation that reflected a set of core values and priorities regarding the law.  Partisan differences were reflected in the choices states made, more than in the way they framed their choices.

The first act ran hundreds of pages as states generated documents and analyses that reflected the questions that were on their minds.  At least fifteen states prepared fiscal analyses of the ACA and at least ten states developed work plans for the steps they would need to take to implement the law.  You can see materials generated in 2010 from states like Iowa, Colorado, and Maryland on State Refor(u)m.  States also began preparing decision documents and giving presentations that framed their key choices, such as whether or not to build a health insurance exchange.  They also started to engage with the health care sector and the public regarding these decisions.

Act II: Battle Of The Branches

Act II opened in early 2011 with the return of most state legislatures to their state houses for the first time after enactment of the ACA. In many states, legislators of both parties asserted their branch’s coequal authority and demanded a role in making decisions, appropriating funds, and guiding the course of implementation.  Fresh from a hotly contested election in which the ACA or “Obamacare” was a major issue, a significant share of Republican state legislators had a very different view of the law than did many governors, even of their own party. In these legislators’ view, any action to implement the law could be interpreted as support and could undercut the states’ legal challenges to the law.

In Act II, we saw states like Oklahoma enter into a tug of war between the governor and legislature regarding which one would define the course of implementation, including applying for and appropriating federal grants.  We saw a Republican governor in Virginia, who strongly opposed the ACA, take a pragmatic approach while the state’s attorney general pursued a high profile legal battle against the law.  In New York, a health insurance exchange provision supported by the governor was blocked in the last days of the state legislative session due to the surprising strength of a group of opponents. Much of the debate during Act II focused on whether or not states should establish health insurance exchanges—a visible and concrete aspect of the law—but skirmishes arose on other aspects as well, including insurance regulation and abortion coverage.

As Act II came to a close, states split into three categories.  About a dozen states adopted legislation or executive orders setting the state on a course toward implementation. Approximately half a dozen states, led by their governors, took highly visible positions not only in opposition to the law, but in explicit resistance to any implementation steps.  We saw this unfold in Florida, Texas, Alaska, and Minnesota, among others. The vast majority of states sat in the middle, with task forces or study commissions continuing to analyze options, but with only tentative steps toward implementation.  For example, Illinois and Michigan established health reform coordinating councils to advise their governors on key implementation decisions, while New Mexico created a health reform leadership team to develop a strategic plan for implementation and to coordinate implementation planning across state agencies.

Act III: Newton’s First Law Of Motion

Act III, the period between the departure of state legislators in spring 2011 and today, has been characterized largely by inertia; states at rest have remained at rest, while those in motion have remained in motion.

In the third act we have seen dramatic progress by leading states that have been working tirelessly toward implementation for almost two years now.  Leader states – like Massachusetts, California, Maryland, Oregon, and Washington – have built the blueprints for all of the major steps states must take if they are to implement the law in full.  These blueprints include designing the health insurance exchange, revamping eligibility and enrollment systems, and bringing insurance regulations into compliance with new federal standards.  These states are also leading the way in working with federal officials to design the interface between the state and federal systems necessary to implement the law.  States that stopped their movement in 2011 have largely remained where they were.  Meanwhile, the large group of states in the middle continue to analyze their options, but visible signs of movement are hard to find.  Barely any ACA-related legislation was considered, much less enacted, during the 2012 state legislative sessions.

Positions for and against have solidified over the past year and the rhetoric surrounding the ACA has become more partisan.  States moving forward with implementation emphasize the fact that the ACA is the law and they need to get ready.  States holding back view the uncertainty brought on by the Supreme Court case and the upcoming election as justification of their approach.

Anticipating Act IV

The curtain will rise on Act IV when the Supreme Court issues its opinion on the various provisions of the Affordable Care Act.  No matter how the Court rules, states will be shaken from their firm positions.  A ruling adverse to the law will force reconsideration of plans in those states that are leading the way toward implementation.  A ruling in support of the law will bring opposing states one large step closer to having the federal government assume responsibility for major activities within their borders.  And a ruling that upholds the law in part and rejects other parts could force the federal government and the states to consider modifications in order to avoid significant problems in the health insurance marketplace.

It is unclear how long Act IV will run.  States expecting a Supreme Court decision throwing out the law, but finding it still intact, may place their bets on the November elections, delaying their own implementation decisions another six months.  If significant aspects of the law are struck down, states may have to wait a very long time before it is clear how Congress and the President will respond.  States in search of a stable, unambiguous federal statutory and legal environment will almost certainly be frustrated.  After all, with a major debate over the federal budget expected in 2013, health policy will be on the federal agenda no matter who occupies the White House and who controls the Congress.

While predictions are risky, it seems likely that Act IV will bring states closer together in their approaches—more like what we saw in Act I.  If there is one thing state officials agree on even when they can agree on little else, it is that they would rather control their own destiny than let the federal government determine it.  As the Supreme Court clarifies the extent of federal power, and as the 2014 implementation deadlines get closer, states will find that they have more in common than today’s rhetoric would suggest.

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