BOISE - Plans for a state-based health insurance exchange crossed another major hurdle Wednesday, surviving a seven-hour House debate and a 41-29 vote.

The legislation now goes to the Idaho Senate, where an earlier version of the bill prevailed 23-12.

House Speaker Scott Bedke, R-Oakley, previously suggested Wednesday's debate "could be one of our finest hours," but it turned testy at the start. Speakers repeatedly wandered off point, raised objections and tried to sidetrack the bill by sending it to the amending order.

Bedke also had to gavel visitors in the gallery because they broke into applause following one impassioned speech against the exchange, and Republican Lewiston Rep. Thyra Stevenson added a jarring note when she questioned whether House Minority Leader John Rusche, D-Lewiston, had a conflict of interest (see related story).

Things settled down after lunch, but the fundamental split remained: Supporters said Idaho can only influence the rules and regulations of the online marketplace by building its own exchange; opponents said moving forward with the proposal makes Idaho a tool of an over-reaching federal government.

Rep. Fred Wood, R-Burley, likened the situation to the introduction of wolves.

Given that the Affordable Care Act requires either a state or federal exchange to be in place come Jan. 1, he said, the only question is how much control the state wants to retain.

"We're being forced to have an exchange, no different than we were forced to have wolves," Wood said. "But we have a choice to run our own exchange or let someone else run it. We'll botch it if we don't have a state-based exchange. By doing it on our own, we can push back as hard as we can."

Rep. Reed DeMordaunt, R-Eagle, said that's not the way he reads the Affordable Care Act.

After reviewing the section on state flexibility, he said, "the only flexibility I see is how we say, 'Yes, ma'am.' Just because we take the word 'state' and put it in front of 'exchange,' we think that somehow magically empowers us. There's no magic here. We aren't being empowered to do anything.

"I hope we aren't going to sign up to be the puppet, to be the enforcer, because the only way (Obamacare) can be enforced is through a state exchange."

Rusche, a former insurance company executive, noted that health plans were historically sold through independent agents, who earned a commission on each sale.

"The exchange is a new way to distribute the product," he said. "It's only for small group and individual policies. That's important to remember, because they're the ones who are most sensitive to price differences."

People who shop through a federal exchange will be assessed a 3.5 percent premium tax to pay for its operation. The cost of a state exchange hasn't been set yet, but it would likely be lower.

"The difference between a 3.5 percent premium and a 1.7 percent premium could make a real difference (to individuals and small businesses)," Rusche said. "That's one of the main reasons I think a state exchange is better."

The House bill, which was introduced by Gov. C.L. (Butch) Otter, creates an independent, nonprofit board to develop and manage a state-based exchange.

The exchange would allow people to shop and compare insurance plans. Participation would be voluntary, although lower income individuals could only receive federal subsidies through an exchange.

The exchange itself must be self-sustaining, so the board would have authority to impose fees. A federal grant is expected to cover the initial development costs.

House Majority Leader Mike Moyle, R-Star, said ceding taxing and rule-making authority to an independent board wasn't his idea of a state exchange.

"We (the Legislature) don't get a look at the rules, we don't get a say in what they charge, we will have no say in what they do. How the heck is that state control?" he asked.

Stevenson said she thought this was "almost the most important vote I'll ever make in my life."

"The implications for generations to come are strong," she said. "It's our duty to establish a new entity, an exchange, and see that it benefits all Idahoans in a positive way."

Stevenson supported the motion to move the bill to the amending order to allow for changes, but it was defeated 38-32.

More than half the House members spoke during the debate. The bill now moves on to the Senate; with only minor changes compared to the bill that was approved in February, it's expected to pass.

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Spence may be contacted at bspence@lmtribune.com or (208) 791-9168.