Nebraska Gov. Dave Heineman made his choice Thursday to opt out of a Nebraska-based health insurance exchange and let the federal government handle it.
Citing the high cost of putting together a state-based exchange and the lack of control the state would have, Heineman said the state will participate in the federal exchange.
The federal government had imposed a Friday deadline for states to confirm whether they would create their own health exchanges for consumers and small businesses.
"On the key issues," he said, "there is no real operational difference between a federal exchange and a state exchange," Heineman said.
The Affordable Care Act contains one federal mandate after another, he said. All the important and critical decisions would be made by the federal government.
Republican Sen. Mike Johanns said he supported Heineman's decision.
"When it comes to the president's health care law, saying anything is state-run is simply a misnomer," he said. "The reality is that the federal government will wholly dictate how the exchange operates."
The cost for running a state-based option would be $646 million for 2013-2020 for things such as website development, call center operations, a billing system and other costs, according to Heineman's calculations. The cost to the state if the federal government ran it for the same time period would be $176 million, for technology and administrative costs, he said.
That higher cost would result in reductions in state aid to schools and funding to the University of Nebraska and other colleges or higher taxes on Nebraskans, he said.
The state has been studying how to comply with the law for more than two years, he said. He had asked for more detailed information and what the rules and regulations would be and got neither, he said.
The exchanges are meant to help people and small businesses make decisions about health insurance plans. It is hoped that having more people insured -- with earlier access to health care -- would help lower the need for more expensive care and costly emergency care.
A number of other governors, including those from Missouri, Kansas, Alabama and Louisiana, have rejected state-based insurance exchanges. Iowa Gov. Terry Branstad said he would tell the federal government that Iowa didn't have enough information to move forward with a state-based exchange.
Omaha Sen. Jeremy Nordquist criticized Heineman for ceding power to the "federal bureaucrats, who will now design and control what our health insurance marketplace looks like and how it functions."
The governor has missed an opportunity to create a new and improved health insurance marketplace, designed for Nebraskans by Nebraskans, he said.
He said there's little hope of the Legislature acting on a state exchange when it comes back into session in January because of the deadlines in the federal law. He's checking on any flexibility, however.
And it's likely it could not start with the federal exchange and change to a state exchange later, because the initial investment would be $70 million to $80 million, and the state no longer would be eligible for a federal start-up grant.
Heineman said he has listened to all sides of the issue, and reasonable people will disagree. But his focus now is on implementing the health care law in the most efficient and cost-effective manner for Nebraskans.
The Nebraska Health Care Alliance, a nonprofit group of businesses, health providers, associations, insurance carriers and individuals from across Nebraska, had advocated for the establishment of a state-based health insurance exchange, saying local regulators understand what is best for Nebraska, and with a federal exchange, the state would lose all control.
Bruce Rieker, Nebraska Hospital Association vice president, said his organization recognized there were strings attached to a state-based exchange but wanted more control in making eligibility determinations and how the exchange would be marketed.
"We don't know to what level the federal government will do its part in that function," he said. "If there isn't a push to get people insured, then our hospitals are going to be left holding the bag in many regards."
Rebecca Gould, executive director of Nebraska Appleseed, said she hoped the state now will work with federal officials to create a marketplace that is accountable to its customers, focused on their access to coverage and provides true value for the premium dollars Nebraskans spend on their health care.