About 8 percent of the country is expected to buy health insurance through virtual marketplaces by the end of the decade, bringing those customers a clear menu of competitive insurance options and a quick sense of whether they qualify for government welfare programs.

But getting those marketplaces running by 2014 is proving to be a frustrating mess for many states. The healthcare reform law passed in 2010 offered states tremendous flexibility in designing those marketplaces and left many details to be settled later, opening the door to lots of lobbying and partisan bickering.

To help smooth things out, the Obama administration hired former Oregon Insurance Commissioner Teresa Miller to serve as the point-person with states on exchange issues.

Illinois, Oklahoma, North Dakota and Minnesota this month stalled in their efforts to set the ground rules for their respective health insurance  exchanges. Fifteen other states hit similar roadblocks earlier this year while nine states met success, according to the National Conference of State Legislatures.

Many of the states that failed this year to enact legislation jeopardized their chances of meeting aggressive federal deadlines to control their own destinies and hold onto federal grants.

Around the country, health insurance companies, legislators and healthcare advocacy groups have struggled to agree on the role each group should play in determining how 24 million Americans will purchase and pay for healthcare insurance.

"They had to start working yesterday to get all the pieces in place," said Glenn Melnick, a healthcare finance expert at the USC School of Policy, Planning and Development.

Most health insurance companies favor that states create their own exchanges rather than defaulting to a marketplace run by the U.S. Department of Health and Human Services.

Melnick and other experts said insurance companies have an easier time influencing state legislators than they do federal regulators because they can resort to tactics such as threatening to move out of a state to complicate negotiations. And states typically put up fewer administrative hurdles than the federal government.

Even if states cede control the federal government, federal officials will come back with a bill for the state eventually.

"Defaulting to a federal exchange is not a free ride," said Dan Schuyler, a consultant with Leavitt Partners, which has been advising states on healthcare reform.

He's told states to create their own exchange to meet the needs of their specific population.

"Otherwise, you give up a lot of control and flexibility," he said.

States creating their own marketplace can choose to be market organizers, market contractors or anything in between.

That means states could let any insurer that meets basic requirements list themselves on the marketplace or they could put out a request for bids and only the insurers that offer up plans for superior bang for the buck would be allowed to solicit customers. Insurers who participate in the marketplace would not be allowed to deny applicants.

Even under a federal exchange, Schuyler said the expectation is states would have the chance to choose which method they want.

"From the standpoint of simplicity and individual choice, the market organizer approach for an exchange is more in line," he said.

Under Gov. Mitt Romney, Massachusetts pioneered the market contractor approach while Utah set the standard for the organizer option under Gov. Jon Huntsman. Both of the former governors are now running to be the Republican nominee for president.

In Illinois, the standoff this month was partially over which path to take.

The state's largest insurer, Blue Shield, hasn't taken a public position on which model it would prefer to follow.

"We anticipate that all of the players on the exchange space would be required to play by the rules set up by the board," said company spokesman Mike Deering. "Clearly, the best products and the best-priced products will prevail in both the customer's and state's perspective."

The American Medical Association voted this week to back the Utah-like market organizer model, saying that following Massachusetts' lead would lead to a destruction of open market competition.

Meanwhile, federal regulators have already caused confusion by proposing regulations that run counter to what some of the dozen states that have raced ahead have already adopted. That's forced the states to make sure they get the exceptions or that the final rules get changed.

For everyone else, Schuyler said the lack of a definition in the healthcare reform law for "significant progress" gives room for states to be at different stages and still be on-track.

"While (federal officials) haven't come out and said they would be extending deadlines, I hope they realize there's a lot of uncertainty and that states need a lot more time," he said. "We encourage states to reach out and ask for that flexibility. While they haven't passed legislation, they are still very interested. These things can't just happen overnight."

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