On February 7, 2011, Republican Governors sent a letter to Secretary of Health and Human Services (HHS), Kathleen Sebelius, emphasizing that the future of the Affordable Care Act (ACA) is uncertain and suggesting a short of list of “improvements” to ACA. On January 31, 2011, a Florida court ruling in favor of twenty-six states found that ACA’s “individual mandate” (IM) and in turn the whole of ACA is unconstitutional. The case will almost certainly reach and ultimately be decided by the U.S. Supreme Court.

The Governors’ letter says that the States now “face the decision of whether to participate in [ACA] by operating state [insurance] exchanges, or to let the federal government take on that task,” even though the States cannot know at present whether ACA will be in force in 2014. Although the IM does not take effect until 2014, the ACA requires states to establish insurance exchanges ready to operate January 1, 2014. If a state does not set up its own insurance exchange, the Federal government must step in and set up an exchange in that state, which could occur in 2012 or earlier. As a result, states cannot wait to see what happens with the litigation concerning the constitutional questions. ACA provides that HHS can set up and operate an exchange in any state that “the Secretary determines on or before January 1, 2013” will not be able to meet the 2014 deadline for setting up its own exchange.

Although the Governors' express “grave concerns” about ACA and note their belief that it contains “constitutional infringements,” the letter nonetheless urges the following targeted ACA modifications:

  • Provide states with complete flexibility on operating the exchange, most importantly the freedom to decide which licensed insurers are permitted to offer their products
  • Waive the bill’s costly mandates and grant states the authority to choose benefit rules that meet the specific needs of their citizens.  
  • Waive the provisions that discriminate against consumer-driven health plans, such as health savings accounts.  
  • Provide blanket discretion to individual states if they chose to move non-disabled Medicaid beneficiaries into the exchanges for their insurance coverage without the need of further HHS approval.  
  • Deliver a comprehensive plan for verifying incomes and subsidy amounts for exchange participants that is not an unfunded mandate but rather fully funded by the federal government and is certified as workable by an independent auditor.  
  • Commission a new and objective assessment of how many people will end up in the exchanges and on Medicaid in every state as a result of the legislation (including those “offloaded” by employers), and at what potential cost to state governments. The study should be conducted by a neutral third-party research organization approved by the signatory states.