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States given more time to work on health exchanges

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The White House, shown as crowd gathers for a speech.
The White House, shown as crowd gathers for a speech.

By David Morgan and Alina Selyukh

WASHINGTON (Reuters) - The Obama administration gave states extra time to work toward setting up new health insurance exchanges on Friday, days after President Barack Obama's re-election ensured the survival of his healthcare reform law.

The move is seen as a concession to dozens of states that delayed compliance with the Patient Protection and Affordable Care Act until after the November 6 election. Opponents of the plan had hoped a victory for Republican Mitt Romney would ultimately result in the law's repeal.

But with Obama now heading into a second term, and a November 16 federal deadline to declare their plans looming, many states needed more time to prepare for exchanges, complex marketplaces meant to offer working families private insurance at federally subsidized rates beginning in 2014.

Since Tuesday's election, seven states including Texas, Kansas, Virginia and Florida have said they will not pursue state-operated exchanges and conservative political donors are mounting a publicity campaign to encourage more defections.

But there are also signs that opposition could be waning in some states.

In cases where states decide not to participate, the federal government says it will go in and build an exchange on its own.

"The administration would like to do whatever it can to bring states in," said Larry Levitt, a healthcare policy expert with the nonpartisan Kaiser Family Foundation, which tracks health issues.

"It's always been expected that if the president got reelected, a lot of states sitting on the sidelines would realize they don't want the federal government building a state health insurance system. That's what we're seeing happening."

U.S. Health and Human Services Secretary Kathleen Sebelius said in a November 9 letter to governors that the administration still expects states to declare whether they intend to operate their own exchanges by next Friday.

But they now have until December 14 to file blueprints showing how they would operate the marketplaces. So far, about 13 states are well on their way to setting up their own exchanges.

States can also choose to develop their exchange in partnership with the federal government. As many as 30 could go that route.

Sebelius said states that prefer a partnership now have until February 15, 2013, to declare their intentions and prepare the appropriate paperwork. She said states can still apply to run exchanges in subsequent years but emphasized that the start date for coverage has not changed.

"Consumers in all 50 states and the District of Columbia will have access to insurance through these new marketplaces on January 1, 2014, as scheduled, with no delays," she said in the letter, which described the deadline extension as a response to state requests for more time.

Analysts characterized the extension as a substantial offer from the federal government.

"It's about as far as they reasonably could extend, knowing that the systems have to be ready by Oct 1, 2013," said Patrick Howard, who advises states on healthcare issues for Deloitte.

The Affordable Care Act, the most sweeping health legislation since the 1960s, would extend health coverage to more than 30 million uninsured Americans. About half would receive coverage through a planned expansion of the Medicaid program for the poor, and the other half through the exchanges.

The list of states that say they will not participate in the healthcare exchanges grew this week when Virginia and Kansas added their names.

Texas, South Dakota, South Carolina, Alaska and Florida confirmed to Reuters on Friday that they will not participate in exchanges. Louisiana had also opposed the plan before the election, but officials there did not respond to inquiries about their plans under Obama's second term.

But Maine, which advised the administration last April that it did not intend to pursue a state-based exchange, said on Friday that further guidance from Sebelius' department could make a difference.

"It's too soon to tell," said Adrienne Bennett, spokeswoman for Republican Governor Paul LePage.

"We're willing to look at the information and move forward. But we can't move forward if we don't have information from the Obama administration. So we're in a holding pattern," she said.

Several Republican advocacy groups are expected to push against the implementation of Obama's healthcare law. Americans for Prosperity, a conservative non-profit in part funded by billionaire Koch brothers, on Friday urged U.S. governors to reject the state-based exchange options, calling them "flawed" and "bloated bureaucracies" that put states' budgets at risk.

(Writing by David Morgan; Editing by Michele Gershberg, Eric Walsh, Claudia Parsons and David Gregorio)

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