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Originally published Wednesday, November 28, 2012 at 2:30 PM

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Brewer rejects state-run health exchange for Ariz.

Arizona Gov. Jan Brewer has decided against creating a state-run health insurance exchange to implement a key part of President Barack Obama's federal health care law.

Associated Press

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PHOENIX —

Arizona Gov. Jan Brewer has decided against creating a state-run health insurance exchange to implement a key part of President Barack Obama's federal health care law.

Brewer's decision announced Wednesday means the federal government will set up an online marketplace for the state, offering subsidized private health coverage to the middle class. The governor reiterated her unwavering opposition to the health care overhaul, and said there were too many costs and questions associated with a state-run exchange.

"The federal government would maintain oversight and control over virtually every aspect of our exchange, limiting our ability to meet the unique needs of Arizonans and the Arizona insurance market," she said in a statement.

Brewer joins other Republican governors in such states as Texas and Maine who have balked at creating state-run exchanges, although others in Nevada and New Mexico have opted to proceed. She sent a federal official a one-page letter conveying her decision.

Her announcement preceded a Dec. 14 deadline for states to declare whether they'd run their own exchanges.

A decision to create an exchange would have been subject to approval by the Republican-led state Legislature. Though the Nov. 6 election results reduced the size of Republicans' majorities in the state House and Senate, a Brewer push to create a state-run exchange would have faced a fight from GOP lawmakers who oppose the law.

An alliance of hospitals, insurance companies and business groups wanted Arizona to have a state-run exchange, arguing that it would increase coverage while giving the state flexibility in designing a program to its liking.

Conservative advocacy groups such as the Goldwater Institute stood in opposition. They said Arizona shouldn't help implement a law that could foist new expenses on the state and raise health insurance prices for residents.

Senate President-designate Andy Biggs said he appreciated Brewer's thoughtful deliberation.

"Any exchange run by Arizona would still include an inappropriate imposition by the federal government on our state," the Republican lawmaker said.

"State control is a mirage," agreed Sen. Nancy Barto, a Republican who heads the Senate's health committee.

The incoming Senate minority leader, Democrat Leah Landrum Taylor, said Brewer's decision was a "missed opportunity to establish health care solutions that are tailor-made for the unique needs of the state."

House Minority Leader Chad Campbell, a Democrat, said Brewer's decision was grandstanding that reflected "an extremist agenda."

Brewer's administration spent two years planning for a possible exchange, accepting federal grants totaling approximately $31 million to pay for the advance work.

The grant money is paid to the state to reimburse it for costs, Brewer spokesman Matthew Benson said. Most of the money remains unspent and available to pay for costs for working with the federal government on its creation of an exchange, he said.

As part of that planning, Brewer in September selected a minimum benefits package for a state-run exchange based on current insurance coverage for state employees. She noted in a Sept. 28 letter to the Obama administration that the package she chose excludes abortion coverage.

On another implementation issue with state versus federal considerations, Brewer has decided it would be better to have the state run its own program to review health insurance rates, rather than leave that to the federal government. The state has formally approved rules for a rate-review program.

Brewer still must decide whether to expand eligibility for the state's Medicaid program as called for by the law.

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