Democratic and Republican leaders in the Illinois General Assembly have agreed to shelve a bill that would establish an Illinois health insurance exchange amid uncertainty created by the constitutional challenge to the federal health care overhaul before the U.S. Supreme Court.

State-level exchanges, which would allow individuals and small businesses to purchase health coverage, are expected to play a crucial role in satisfying the mandate to buy insurance imposed under the Patient Protection and Affordable Care Act of 2010. The Supreme Court is likely to rule on the constitutionality of the federal health care law in June, weeks after the scheduled May 31 end of the Illinois Legislature’s spring legislative session.

A failure by the General Assembly to pass an exchange bill almost certainly means that Illinois will miss the Jan. 1, 2013, deadline to show they have an operational exchange, according to lobbyists who have been working on the issue. If a state misses that deadline, the Affordable Care Act requires that the federal government take over the exchange from state officials.

Michael Madigan, D-Chicago, speaker of the House of Representatives, and Senate Majority Leader John Cullerton, D-Chicago, have no interest in calling for a vote on an exchange bill that doesn’t have bipartisan support, people familiar with their thinking say.

Meanwhile, House and Senate Republicans “said there were no votes in their caucuses pending the outcome of the Supreme Court decision,” said Phil Lackman, vice president of government affairs for Independent Insurance Agents of Illinois.

Earlier this month, Rep. Frank Mautino, D-Spring Valley, who has played a key role in negotiations over the bill, said he decided not to push for a vote because of uncertainty created by the Supreme Court case.

“I’ve suspended the talks on the Illinois insurance exchange until the Supreme Court makes its decision,” Mr. Mautino, who is House deputy majority leader, said in an interview broadcast this month on WUIS-FM/91.9 Public Radio in Springfield.

The delay is likely to increase the chances that Gov. Pat Quinn will issue an executive order that would outline the “skeleton” of an exchange and kick-start its construction. Mr. Quinn has been considering such an order since at least February, when the legislative proposal already showed signs of stalling.

Such an order would set the tone for the discussion when legislators return to Springfield for the fall veto session, said Jim Duffett, executive director of the Champaign-based Campaign for Better Health Care, a consumer group.

“You can get the ball rolling,” he said.

In New York, Gov. Andrew Cuomo, a Democrat, last month issued an order setting up an insurance exchange after Republicans in the state Senate blocked proposed legislation.

On Wednesday, a spokeswoman for Mr. Quinn would only say that the administration would continue laying “groundwork” that does not require legislation or an executive order.

“The administration is committed to creating an Illinois-based exchange and continues to work with members of the General Assembly to prepare for it,” she said in an email.

Representatives of Mr. Madigan, Mr. Mautino and Senate Republican Leader Christine Radogno, R-Lemont, did not return calls for comment. A spokeswoman for Mr. Cullerton declined to comment.

House Republican Leader Tom Cross, R-Oswego, has been critical of the state exchange proposals in the past. His spokeswoman declined to comment.

The decision not to call an exchange bill for a vote is likely to only increase the confusion created by the Supreme Court case.

The health reform law requires that exchanges — whether state- or federally run — start selling insurance to individuals and small businesses on Jan. 1, 2014.

“We don’t know what the federal exchange is going to look like,” said Laura Minzer, executive director of the Health Care Council of the Illinois Chamber of Commerce, which has pushed for local oversight of the exchange. “One would have to guess that it’ll be pretty flexible, but it’s a big question mark.”

Consumer advocates agree the structure of the exchange shouldn’t be decided by the federal government.

“It’s ridiculous that we’re going to let the federal government set up an exchange for Illinois’ health care market,” said Brian Imus, who as director of public interest group Illinois PIRG has been in discussions on the exchange. “That’s Illinois lawmakers’ job.”

Startup costs for the exchange are estimated at $90 million, which the state can offset with federal funding through 2014. As of March, 13 states and the District of Columbia had established exchanges, according to the Menlo Park, Calif.-based Henry J. Kaiser Family Foundation.

Original article from Crain’s