With Newly-Elected Governors, GOP Gains Clout To Fight Health Reform Law

By Julie Appleby and Mary Agnes Carey
KHN Staff Writers

Nov. 2010--The Democrats' ambitious health care overhaul is facing roadblocks from newly elected state officials who harshly criticized it while campaigning and who are now in a position to make good on their promises.

In at least 10 states, including Kansas, Tennessee and Oklahoma, Republicans replaced Democrats in governors' mansions.  The GOP also picked up seats in  legislatures in many states.  In the four races for state insurance commissioner, two went to candidates opposed to the law, while voters in California picked a Democrat in favor of it. One incumbent ran unchallenged.

GOP gubernatorial winners included Sam Brownback of Kansas, who called the reform law "an abomination." Tennessee's governor-elect, Bill Haslam, said the law is an "intolerable expansion" of federal power and a "reminder of the incredible arrogance of Washington."

In Ohio, former House Budget Committee Chairman John Kasich defeated Democratic incumbent Ted Strickland, after criticizing the law as doing nothing to control costs and "giving bureaucrats more control over our personal health care decisions."  Republicans also took control of the legislature.

In Wyoming, the election of Republican gubernatorial candidate Matt Mead could have significant implications for the health law in that state, since he will have the power to appoint the attorney general and insurance commissioner. Mead says Wyoming cannot afford its share of the funding necessary to expand Medicaid.

While unable to overturn the federal law, the newly elected officials will be under pressure to act. They could lean on congressional delegations to repeal or change the legislation, seek waivers from some of its provisions, veto state legislation related to it and appoint like-minded people to important positions, such as insurance commissioner slots.

At the very least, states may opt to slow implementation, while Republican lawmakers look ahead to the 2012 presidential election.

"If the Republican governors were to get together and say 'we're going to derail this train,' they could do much more to reverse the national health [law] than an effort to repeal it in Congress," said Ross Baker, a political science professor at Rutgers University. "The governors could, without defying federal law, simply implement it inefficiently, throw sand in the gears."

To be sure, some political observers say that as the dust settles, even governors who vehemently opposed the bill may realize if they don't act in key areas – such as establishing health insurance marketplaces – the federal government will do it for them. In addition, the new law includes federal funding to expand the Medicaid program and grants to set up or bolster other programs, including public health. Governors may be reluctant to turn down the money.

While Congress may end up in gridlock, the law requires state officials to make decisions in several key areas during the next few years, with lasting impacts on consumers, insurers, state finances, employers and the uninsured.

States must decide whether to set up their own insurance marketplaces, called exchanges, and whether to grant state regulators more authority, such as the power to review and reject premium increases before consumers start paying the new rates. One of the most difficult steps will be planning how to enroll millions of newly eligible low-income residents into Medicaid programs starting in 2014.

Obama administration officials say most states are already working to carry out the law – and they expect that will continue no matter how power may have shifted in Tuesday's election.

Still, with state budget pressures and other concerns, "you are going to see push back … and demands for changes to the legislation to give them more flexibility and control," said Grace-Marie Turner, president of the Galen Institute, a conservative, free-market research group.

Even before the election, some elected officials moved to block or slow the legislation, including Republican Minnesota Gov. Tim Pawlenty.

In Florida, the incoming House speaker Dean Cannon wrote Gov. Charlie Crist in October cautioning that the legislative branch, not the executive, would be setting the framework for applying the law. And 20 states have already joined a Florida lawsuit to overturn the law on constitutional grounds.

Brownback has said he wants Kansas to join a lawsuit challenging the health overhaul. Taking that step will pit state residents against their former governor, Kathleen Sebelius, now the secretary of Health and Human Services, who is crafting key regulations needed to launch the law’s many provisions.

Kansans also re-elected Insurance Commissioner Sandy Praeger, a moderate Republican who beat back a challenge in the primary and ran unopposed Tuesday. Along with a number of other state commissioners, Praeger has played a key role in helping craft new rules that will affect the health law in her role as a leader in the National Association of Insurance Commissioners.

Praeger sees many upsides in the law for Kansas, including the expansion of Medicaid in 2014 to low-income working adults with no children. They currently don’t qualify for Medicaid in her state and many others, no matter how little their income.

"There's been so much rhetoric about 'Obamacare' and not liking this law, that we have a steep learning curve in terms of pointing out to state legislators and new governors all the benefits," Praeger said.

No matter which party is in charge, state officials face a number of decisions:

Creating Exchanges

State GOP leaders could refuse to set up and run health insurance exchanges, marketplaces where consumers shop for health insurance coverage. But if the states don't do it, the federal government will do it for them. And many governors and insurance commissioners may balk at that.

States also determine how exchanges operate. They could, for example, allow all insurers in the market to offer their wares, just as Utah now does. Or they could be more selective, allowing only those that pass muster with the state or with an appointed group, as is currently done in Massachusetts.

Even Republican governors most critical of the law will likely want to set up their own insurance exchanges, said Michael Leavitt, who was secretary of Health and Human Services under President George W. Bush, and is now advising states on the matter. "My guess is that folks in Wyoming might not be enthusiastic about the federal government running an exchange in their state."

Overseeing Insurers

The new law calls for states to work with the federal government to establish ways to review what are deemed "unreasonable" premium increases, but it is up to the states to decide what to do about such increases. Many states currently do not give regulators veto power over premiums, although they can exert pressure on insurers. A handful of states allow insurers to file their new rates without waiting for any review.

State lawmakers must decide whether to boost their state insurance commissioner’s authority to reject premium increases or leave current law in place. Praeger, the Kansas commissioner, expects there will be pressure from the public – and from the federal government – to increase such authority. But there will be pressure not to, as well.

"Republicans tend to be less regulatory minded, so it may be more difficult in those states to get that additional rate-approval authority," said Praeger, whose own office does not have prior approval authority over rates, but does have substantial review power.

Under the new law, insurers must spend at least 80 percent of their revenue on direct medical care or issue rebates to consumers. Regulations outlining what is considered medical care – and how to issue refunds – are awaiting final approval by the Department of Health and Human Services.

States can seek an exemption from the rules if they fear that meeting them could cause severe disruptions in the market for individual coverage. Maine, which is served by very few insurers, has already said it would seek an exemption and more states are expected to follow.

Skip Federal Funding?

Another complication: Most states have already sought and accepted millions in federal grants to help increase scrutiny of premium increases, bolster consumer assistance offices and design health insurance exchanges. States that discontinue those programs would forfeit grant money in future years.

Still, not all states sought funding. Minnesota and Alaska, for example, did not seek money to begin planning for state-based exchanges. Wyoming, Iowa, Georgia and Minnesota also did not seek funding to boost insurance premium review efforts.

More grants will be available in 2011, including funding for community health centers.

But elected officials may run into trouble with voters if their actions are seen as letting insurers off the hook for some of the law’s popular provisions, such as a bar on rejecting applicants with medical problems.

"If they are seen as a subsidiary of the insurance industry, that’s not good for them politically," says Jonathan Oberlander, professor of social medicine and health policy at the University of North Carolina-Chapel Hill.

Marilyn Werber Serafini contributed to this story.