Five Republican state lawmakers have the power to kill Colorado’s work so far in implementing a key part of the federal health care law. CPR Health Reporter Eric Whitney says they’re considering blocking federal funding for a health insurance exchange. 

Here is a transcript of Eric's story.

Reporter: It was the most controversial and contentious fight of the 2011 Colorado legislative session – whether to pass the so-called “exchange” bill. The bill said Colorado should take the lead in creating an internet marketplace where people could choose health coverage plans once such  insurance is mandated by the federal health care law.  

Republican Senator Shawn Mitchell of Broomfield said: Bad idea. 

Mitchell:  if government could create a market in health care, it wouldn't have messed up the current market that we all live in so badly. What this is is a government solution to government problems. 

Reporter: But fellow Republican Amy Stephens, then the House majority leader, said Colorado needed to pass a law setting up its own exchange, because if it didn’t, the federal government would set one up for the state.

Stephens:  Given our situation, what's right for Colorado, what's right from a state's rights perspective, this is probably one of the more proactive and better positioned things that we could do for our state.

Reporter: After a bruising fight, Stephens won enough Republican votes for the bill to pass, and the state set up a board to create Colorado’s own exchange, using federal grant money. But Republicans gave themselves an out – creating a special legislative committee that has to OK every exchange grant application. Last week, they took at look at the state’s biggest exchange grant application to date, for $43 million. 

Lundeberg: I don’t think it’s a given, and I would hope everyone on this committee would carefully consider that as well.

Reporter: That’s Republican Senator Kevin Lundberg of Larimer County. He says he wants to know how the exchange will sustain itself when the federal grants to set it up run out.

Lundberg: Where are the plans to pay for this long term? Where will it come from? If this was a situation of entrepreneurs coming to investors, that would be the first question, and so that is the first question.

Reporter: No one on the state exchange board has an answer - yet. The exchange is supposed to be kind of like an internet travel service - you plug in your information about your age and health, and what you need for health care, and you get a list of options for coverage and prices. That website will need to be kept up-to-date, there will need to be a call center for people who need help and other services. Gretchen Hammer, chair of the state exchange board, says it’s still working on long term funding options.

Hammer: We have started those discussions, we are not to the place where we have a full financial model created.

Reporter: That answer didn’t make Senator Lundberg very happy, and several lawmakers on the review committee expressed discomfort with the many unknowns the exchange board is facing. Senator Ellen Roberts, a Republican representing southwestern Colorado says she’s worried about trying to set up an exchange when no one is sure many people are going to use it.

Roberts: I’m just a little perplexed as to how you can determine the viability of this, if the line of Medicaid eligibility is somewhere floating out in the land of uncertainty.

Reporter: Medicaid eligibility is important, because people who are eligible for Medicaid won’t need to use the exchange to buy coverage. The federal health care law called for a big expansion of Medicaid, but the Supreme Court's ruling on the law made that optional for states. So now, no one knows how big the Medicaid population will be in the future and, therefore, how many more or fewer people the exchange might have to serve.

There are lots of other unknowns, but Senator Irene Aguilar, a Denver Democrat says that shouldn’t keep the oversight committee from letting the exchange board continue its work setting up the new marketplace. 

Aguilar: Doing nothing is really not an option. The number of people we have who are uninsured continues to rise while our costs also continue to rise. And I think the opportunity to have our own people designing something that hopefully will conform with Colorado values is our best way out at this point in time.

Reporter: Republicans are still reluctant to buy that argument - that Colorado is better off using federal money to set up its own exchange, when they don’t think government-created exchanges are the answer at all. The difference now is, Republicans don’t have the hope of the Supreme Court throwing out the law, and making the whole argument go away.

The decision about whether to seek federal grants for the exchange could come down as early as this week, or at the oversight committee’s meeting next Monday. 

(The transcript of this story corrects the original text, which stated that the Supreme Court threw out the Medicaid expansion in the Affordable Care Act. The court's decision made the expansion optional for states.)

[Photo: CPR News]