A Des Moines legislator who led the effort to form a state health insurance exchange says the General Assembly’s failure to enact a bill means Iowa will be subject to a federally operated exchange in 2014.

A spokesman for Gov. Terry Branstad, however, maintains that the governor has the authority to establish a state exchange without legislative approval, and will proceed if the U.S. Supreme Court does not overturn the federal law. An opinion by the Supreme Court on the law’s constitutionality is expected to be handed down by late June.

Health insurance exchanges, mandated to begin operating on Jan. 1, 2014, are meant to function as marketplaces in which individuals can compare and purchase health coverage policies. Under provisions of the Patient Protection and Affordable Care Act, states that want to operate their own exchanges must have their plans approved by the U.S. Department of Health and Human Services by Jan. 1, 2013. States that haven’t established their own exchanges will operate under a federal exchange.

The final federal rules issued in March do not specify whether legislative action is required to establish a state-run exchange. As of May 10, 10 states and the District of Columbia have enacted legislation to establish state exchanges. Two other states – Rhode Island and New York – established exchanges by executive order. Governors in New Jersey and New Mexico vetoed establishment bills passed by those states’ legislatures.  Massachusetts and Utah passed laws prior to the enactment of the Affordable Care Act in March 2010.

“The governor thinks he can do it on his own, which he can’t,” said Sen. Jack Hatch, a Des Moines Democrat who led the failed legislative effort for a state exchange. “If we don’t have an operating exchange by January, we will have a federal exchange. The governor has been difficult to deal with; he hasn’t given us the courtesy of discussing it with us.”    

Tim Albrecht, Branstad’s press secretary, said, “I think we’ve been clear from the get-go that the federal takeover (of health insurance) is unconstitutional, but that we will proceed if the Supreme Court rules that it’s constitutional.” Albrecht said that work by state agencies to plan the exchange is well under way. Iowa has received $7 million in federal grants to develop its state plan.

The Iowa Insurance Division received statutory rulemaking authority specific to the Affordable Care Act through a bill approved by the Legislature a year ago, said Tom Alger, a spokesman for the division. “The governor’s office regards this statutory provision as sufficient for the division to proceed,” Alger said.