By Constitution Staff

On April 14, Governor Mary Fallin joined other state leaders in announcing that Oklahoma will reject a federal grant for implementing a health insurance exchange as required under the Patient Protection and Affordable Care Act (PPAA), commonly referred to as "ObamaCare." The $54.6 million grant would have been used over the next three years to design and implement an information technology infrastructure to operate the Oklahoma health insurance exchange. The grant application was submitted by Gov. Brad Henry and state Insurance Commissioner Kim Holland.

Instead, Oklahoma will establish the Health Insurance Private Enterprise Network to prevent the establishment of a federal health care exchange in Oklahoma. Fallin said that she worked with legislative leaders to address the concerns that had been expressed concerning the legislation to establish the health insurance exchange. The governor said that specific safeguards were being included that will prevent the implementation of a federal health care exchange while creating an Oklahoma-based health insurance network.

The Health Insurance Private Enterprise Network, based on a concept by the conservative Heritage Foundation and legislation passed by the Oklahoma Legislature in 2009, will increase access to affordable, private, portable health insurance plans through a free market-based network that offers choice and competition to consumers. The network will be governed by a board consisting of a majority of members from the private sector and chaired by the Insurance Commissioner. The network will be funded through state or private resources instead of the federal grant.

Fallin said, "I'm pleased to announce this agreement that accomplishes my goal from the very beginning: stopping the implementation of the president's federal health care exchange in Oklahoma. We have addressed concerns expressed by implementing strict safeguards to prevent the implementation of the federal health care exchange while definitively laying out the framework for a free market-based network that will empower consumers by providing a place for individuals, families and small businesses to shop for affordable, quality health insurance plans."

Oklahoma House Speaker Kris Steele said, "Health care coverage is not a one-size-fits-all issue. We need to make all options available to the people. The goal is to equip Oklahomans with the information necessary to make wise decisions. The network will provide a user-friendly tool intended to help people identify a health plan that best fits their individual needs."

Senate President Pro Tempore Brian Bingman added, "This private enterprise network not only offers the people of Oklahoma more options when buying insurance, it will serve as a defensive strategy that protects Oklahoma from the federal health care law. This is Oklahoma's solution and federalism at work. Our plan is based on the principals of the free market; it will not limit participation, it will increase competition among private plans and offer consumers the ability to shop for their best option."

The announcement represented a shift from the position that the three state leaders took just two months earlier. On February 25, Fallin said she was accepting the $54.6 million "Early Innovator Grant" and that she had the support of Oklahoma House Speaker Kris Steele, Senate President Pro Tempore Brian Bingman and the newly elected Insurance Commissioner John Doak.

At that time, Bingman said "This early innovator grant will allow Oklahoma to put in place the necessary technological infrastructure that makes these plans accessible to citizens of our state." But, at the end of March, Bingman said the Oklahoma Senate would not consider House Bill 2130, the legislation necessary to create the state health insurance exchange. The bill, which had earlier been pushed through the House by Speaker Steele, would define the membership and appointments to the board which would oversee its implementation. Bingman warned that proceeding with the grant could lead the state into a "trap" of complying with the new federal health care law. Bingman's comments came just days after Fallin urged legislators to pass the bill.

Why did Bingman reverse his support for the bill and the federal grant? Bingman said that concerns about the federal grant "and the strings attached" led to a consensus to rethink the issue. Sen. Bill Brown (R-Broken Arrow), chairman of the Senate Insurance and Retirement Committee, told Bingman that he researched the federal grant and found that accepting it could put Oklahoma at risk of having the federal government run its health care exchange. Bingman said that Sen. Clark Jolley of Edmond, a fellow Republican and the bill's sponsor, "was concerned about moving forward." Bingman said, "We will work with the House and the governor, and work out an exchange that is right for Oklahoma." He said policymakers might use "private or state resources" to put together our own exchange without the federal strings.

Fallin responded that the state had not yet received the first installment of the federal funds, but both she and Speaker Steele disagreed with Bingman's suggestion that the state not accept the money. Fallin said that if the state does not have a plan in place this calendar year, and waits until 2012 to finalize one, Oklahoma would face "a very tight time frame" to comply with the new health care law's mandates.

"My hope is that the federal health care bill will either be ruled unconstitutional by the Supreme Court or that Congress might take up legislation to repeal it and replace it with other free-market health care reform initiatives," said Fallin. "But whether that happens or not, the federal health care bill is still the law of the land." If Oklahoma fails to establish its own health insurance exchange that complies with federal requirements, Fallin warned that the federal government will impose its own system on the state.

The press release issued by the U.S. Department of Health and Human Services (HHS) on February 16, was titled: "States Leading the Way on Implementation: HHS Awards "Early Innovator" Grants to Seven States." In the press release, HHS announced "the award of seven cooperative agreements to help a group of "Early Innovator' states design and implement the information technology (IT) infrastructure needed to operate Health Insurance Exchanges." HHS Secretary Kathleen Sebelius said "These grants ensure that consumers in every state will be able to easily navigate their way through health insurance options."

The HHS release said that "sophisticated, consumer-friendly IT infrastructure will be critical to the success of the Exchanges. Although Exchanges are not scheduled to launch until 2014, work is already underway to design and implement them across the country. As states prepare, they have requested early funding assistance to develop the right IT, particularly with respect to eligibility and enrollment systems."

Kansas, Maryland, New York, Oklahoma, Oregon, Wisconsin, and a consortium of New England states led by Massachusetts were slated to receive a total of approximately $241 million. HHS officials acknowledged that every state that applied for the grant received one, though the amount for each varied. Maryland was awarded $6.2 million, the least, while the $54.6 million grant for Oklahoma was the largest.

Opponents cautioned that there is a reason the grant is called an "Early Innovator Grant." We and six other states would essentially lay the groundwork and the federal government will use elements from the seven states to create a national exchange system for all 50 states.

In the cooperative agreement, the Early Innovator states assured that the technology they developed would be reusable and transferable. Using the grants, the Early Innovator states would develop the building blocks for Exchange IT systems, providing models for how Exchange IT systems can be created. "This will help states to establish their Exchanges quickly and efficiently using the models and building blocks created by the Early Innovator states," said HHS.

According to the Oklahoma Healthcare Authority (OHCA), the primary goal of the grant was development of a model for eligibility and enrollment via an exchange. In the grant application, Oklahoma proposed to extend its current technical architecture of Medicaid Management Information System (MMIS) and several other systems to implement the Oklahoma Health Infrastructure and Exchange initiative. It would leverage tools such as the web-based real time claims processing provider service portal created in 2003 by the OHCA. Providers can currently enroll or re-enroll with SoonerCare Online Enrollment (OE) using the provider service portal. Oklahoma planned to issue a Request For Proposal (RFP) under the grant to conduct a gap analysis to determine the necessary steps for its system to become operational.

State Rep. Mike Ritze (R-Broken Arrow), one of two doctors serving in the Oklahoma Legislature, urged state officials to turn down the grant. "The people of Oklahoma voted to opt out of ObamaCare last November, our new state attorney general has filed a lawsuit arguing that the federal law it unconstitutional, and a nullification bill is now moving through the Oklahoma Legislature," said Ritze. "To accept this federal money and the associated red tape completely undermines Oklahomans' clearly expressed opposition to ObamaCare and actually marries our state to ObamaCare."

Ritze said the exchanges created by the federal law would provide a government-regulated marketplace of insurance plans for individuals without health care or small companies. Plans listed on the exchange would have to meet coverage requirements and standards prescribed by the PPAA.

The grant application, officially called the "Cooperative Agreements to Support Innovative Exchange Information Technology Systems," was a 41-page document outlining the purpose, authority, and background of the funding "opportunity" as well as eligibility requirements states must meet in order to qualify.

The grant application specifically called out PPAA Sections 1304(d), 1311, 1323 and 1561 as the authorization for the funding and the standards by which Oklahoma must comply when designing the system.

"By accepting the exchange money, Oklahoma will be in lock-step with ObamaCare," Ritze said. "Furthermore, several independent insurance brokers in Oklahoma are concerned about the impact the exchanges will have on their private businesses. The exchanges operate contrary to the free enterprise system and most likely will put the independent insurance broker out of business."

In April, a group of ten freshmen Republican House members joined together to encourage state officials to reject the federal funds. They said that when the House narrowly passed HB 2130, it did not include a provision concerning the grant. "What we voted for was a free-market exchange based on choice and competition, which will ultimately lower health care costs," said Rep. Randy Grau (R-Edmond). "We did not vote to accept federal money that may require us to set up a federal health care system."

"Since the vote on HB 2130, it has become increasingly apparent that we cannot accept this money without also accepting the strings attached to it," said Rep. Elise Hall (R-Oklahoma City). "It is time to go on record that we do not want this money, but instead, we want to set up an exchange that is right for Oklahoma, not Washington D.C."

"We join Senator Tom Coburn and many conservative organizations in supporting health insurance exchanges like that established in Utah," said Rep. Tom Newell (R-Seminole). "But we think it is important to sever any ties to Obamacare, which means that the federal funds need to be rejected."

"The idea of an exchange based upon free-market principles comes from the Heritage Foundation, a leading conservative think tank," said Rep. Sean Roberts (R-Hominy). "The idea was around before President Obama, but it appears he is now trying to use exchanges to push federal health care."

"We will continue to work with the Governor and House leadership in promoting Oklahoma health care solutions, not Washington D.C. solutions," said Rep. Marty Quinn (R-Claremore).

"Many of us in the House campaigned on the platform of free market principles. If we accept federal money with strings attached, we are going back on our word," said Rep. Josh Cockroft (R-Tecumseh). "It is time for us to sever any ties to Obamacare and allow the private sector to thrive under these free market principles."

"I strongly support the private sector and oppose Obamacare and the use of federal money for a health care exchange," said Rep. Dennis Casey (R-Morrison).

"The state must learn to stop accepting federal money and let Oklahomans take care of Oklahoma," said Rep. Aaron Stiles (R-Norman).

"The attachment of the federal money and its link to federal health care was not fully recognized before the vote on the exchange," said Rep. Dustin Roberts (R-Durant).

"Clarification of the issue seems to tie federal grant money to the Obamacare effort," said Rep. Jadine Nollan (R-Sand Springs). "I support an Oklahoma health insurance exchange without any federal ties."

As pressure mounted to reject the grant, the governor said, "There are legitimate concerns. There are discussions, and I'm listening to them." Fallin said she and her staff were in communication with the state conservative think tank, the Oklahoma Council of Public Affairs (OCPA), to seek input on exchange language that would protect citizens from imposition of "ObamaCare."

Following the announcement that the state would reject the grant, OCPA released the following statement: "Today Gov. Fallin and our state leaders stood on their campaign promises to protect the people of Oklahoma from the rigid, one-size-fits-all approach of Obamacare," said Jason Sutton, J.D., health policy analyst for OCPA. "Oklahoma needs patient-centered health reforms that meet our state's unique needs. A health insurance exchange could be a useful tool in creating an insurance market based on choice and competition; unfortunately, using the federal grant to build our exchange would handcuff our state to Obamacare. Rejecting those funds is the best decision for Oklahoma."

Michael Carnuccio, OCPA president, said: "The best way to protect Oklahoma from Obamacare is to not implement Obamacare. Today, Gov. Fallin and legislative leaders showed that they are willing to put the citizens of Oklahoma above bureaucrats and do what is right for our state."

State Insurance Commissioner John Doak applauded Fallin for her decision. "Gov. Fallin's decision to return the Early Innovator grant further distances our efforts to create an exchange based on Oklahoma's free-market, consumer-oriented ideals from the Obama administration's efforts to impose what likely will be a restrictive framework on Oklahoma," Doak said.

Following the press conference announcing the rejection of the grant, Speaker Steele was asked about a reported contract that the OHCA had with a vendor as a result of the RFP to create the exchange, Steele responded that "there is no contract." He added, that while the grant had been announced and awarded to Oklahoma, no grant money was ever received and that a contract would be contingent upon receiving the federal funds which is not going to happen.

Some opponents of the exchange are still not satisfied. They say it is not necessary for the government, state or federal, to create the exchanges. All major insurance carriers already have portals and there is already one portal that compares different carriers: www.healthcare.org

Rep. Ritze said he opposes any and all attempts to create a health care exchange in Oklahoma, with or without the federal grant. "As the House author of the state question that Oklahomans passed last November to opt-out of ObamaCare, I feel this new exchange proposal is the same old path to socialized medicine," said. "The free market can adopt this approach and we do not need any government involvement with an exchange, especially at the cost of one million state dollars that we do not have."

He noted that Utah's exchange model has already failed, along with those established in Massachusetts, Oregon and Tennessee, costing millions of tax dollars.

Ritze said state lawmakers should focus on opening up the health care system to free market forces. "Senator Brown and I introduced Senate Bill 57 to open up the free market of health care to make buying health care insurance the same as purchasing homeowner's or car insurance. Under that measure, Oklahoma would enter compacts to allow citizens to shop for insurance across state lines. There are more than 100 health care companies available, but we are federally mandated and restricted to only purchase from four to six in Oklahoma. Japan, in contrast, has more than 5,000 health care insurance companies to choose from. Increased competition will lead to lower prices and better products."

Ritze noted that he also introduced House Bill 1276 this session. The legislation would nullify ObamaCare in Oklahoma. "Oklahoma and 12 other states have had legislation introduced to nullify ObamaCare," Ritze said. "I think it is the appropriate action to take considering how many Americans oppose the federal health care law."