LITTLE ROCK — The director of a state board that is working on setting up a state-based health insurance exchange told a legislative panel Wednesday she was disappointed by last week’s U.S. Supreme Court ruling that upheld a key provision of the federal Affordable Care Act.

LITTLE ROCK — The director of a state board that is working on setting up a state-based health insurance exchange told a legislative panel Wednesday she was disappointed by last week’s U.S. Supreme Court ruling that upheld a key provision of the federal Affordable Care Act.


"I think some people are really surprised when I say I had actually hoped for a ruling in favor of King," Cheryl Smith Gardner, director of the Arkansas Health Insurance Marketplace, told the House and Senate committees on insurance and commerce.


Gardner was referring to the King v. Burwell case, in which the nation’s top court rejected arguments that the Affordable Care Act allows only people in states with state-based exchanges to receive federal subsidies to purchase health insurance through the insurance exchanges that were created under the health care law.


About 58,000 Arkansans are receiving the subsidies. Arkansas has a federally-facilitated exchange run in partnership with the federal government.


"I think this was a missed opportunity," Gardner said of the court’s ruling, noting that the Affordable Care Act passed without a single Republican vote. "It would have been nice if we had some bipartisan agreement after King v. Burwell. We don’t have that. The next front for fighting what has become a federal takeover of the American health care system is going to be now with the states."


The mechanism in place for that fight, Gardner said, is a 1332 Medicaid waiver, available under the federal State Innovation Waivers program. Such a waiver would give Arkansas wide latitude in continuing to transform its Medicaid program, as it already did with the Medicaid expansion program known as the private option, she said.


A state task force is looking for a new model to replace the private option starting in 2017, as well as other Medicaid reforms. Gardner said that if the task force comes up with new innovations, having a state-based exchange would be a good idea for any system that involves consumer choice, i.e., any system except a government-run, single-payer system.


Rep. Charlie Collins, R-Fayetteville, chairman of the House insurance panel, said he would oppose a single-payer system, which he called "socialism."


Gardner said a state-based exchange would provide greater flexibility and likely would be more cost-effective.


Federally facilitated exchanges like Arkansas’ are funded with a federally mandated tax on premiums for plans sold through the exchanges — a tax that is now 3.5 percent but could be increased by the federal government in the future, Gardner said. With a state-based exchange, a state can charge whatever fee it considers appropriate and avoid the 3.5 percent tax, she said.


"Could there come a time when the federal government says they are going to cap the cost at 3.5 percent and we are going to let every single state customize (without having a state-based exchange)?" Gardner said. "If the federal government were to come back and say that, then I think it would be foolish to have a state exchange. However, they haven’t said those things, and so in the face of that I think the prudent thing to do would be go ahead and build your own state exchange."


Arkansas has been awarded a federal grant of nearly $100 million to make the switch to a state-based exchange. Earlier this year, the state Legislature passed a law barring the state from making the switch before King v. Burwell was decided.


Collins asked Gardner to prepare a side-by-side comparison of the differing features and costs of a state-based exchange versus a federal exchange.


Gardner also said that as of Wednesday, the start of the 2015-16 fiscal year, operational responsibilities for Arkansas’ marketplace that formerly resided with the state Insurance Department have shifted to the board of the Arkansas Health Insurance Marketplace.


"The commissioner has gone back to being able to be a regulator and not an operator," she told reporters.