In October, Heineman submitted a high-deductible plan for approval — dubbed the "Nebraska Option" — which mirrors a plan that is already used by 6 percent of Nebraska state employees.
Critics said the plan's $8,000 deductible was too expensive for most Nebraskans, but the argument may now be moot: Heineman said federal regulators called the Nebraska Department of Insurance a few days ago and rejected his proposal.
"If it was going to be a state exchange, we wanted to be able to run it, operate it, and make the key decisions here," Heineman said. "It was clear we couldn't do that. And a very important component to me was the cost."
Omaha Sen. Jeremy Nordquist, a Democrat, said the governor's decision against a state exchange effectively "ceded power to federal bureaucrats, who will now design and control what our health insurance marketplace looks like."
In Iowa, Branstad spokesman Tim Albrecht said the governor wants to avoid a federally run exchange, but unanswered questions about the cost of a state exchange may leave him no choice but to accept "a one-size-fits-all exchange that throws us in with other states."
Branstad sent U.S. Health and Human Services Secretary Kathleen Sebelius 50 questions that he said the federal government has yet to answer. The list includes questions about how the state exchanges would work with the Medicaid program, whether states can switch from a federal exchange to a state or partnership program, and whether the federal government will charge states that want to access federal databases needed to operate their own exchange.
State Sen. Jack Hatch, a Des Moines Democrat, said Branstad should have acted earlier and created a state-based exchange that would fit the needs of the state's younger, urban population and older residents in rural parts of the state.
Scott McIntyre, a spokesman for the Iowa Hospital Association, said his group preferred a state exchange because hospitals had not seen evidence that Congress has approved enough money to launch a marketplace for the states. Iowa also relies on three dominant players in health care — Medicare, Medicaid, and one larger private insurer — he said.
"We want to make sure that it conforms to Iowa's needs," McIntyre said. "I don't know if we have a particularly unique insurance market here, but it's basically dominated by Medicare, Medicaid and Blue Cross/Blue Shield. We don't know for certain that a federal model would be able to address that."