BOISE - Gov. Butch Otter began making his case to lawmakers on Tuesday that it's in Idaho's best interests to build and operate its own health insurance exchange.

For now, the Senate is willing to at least consider and debate the merits of Otter's proposal. The Senate Commerce and Human Resources Committee agreed unanimously to introduce legislation pitched by Otter to create Idaho's own online marketplace for individuals and small businesses to shop for health insurance and dental coverage plans.

David Hensley, Otter's chief of staff, told lawmakers a state-built exchange is the best way to preserve Idaho's own decision-making authority and protect the ability of residents and entrepreneurs to make personal health care choices. By not acting, Hensley said Idaho would be forced to deal with the challenges and higher costs of a federal version of the online marketplace - one of the key components of President Barack Obama's health care overhaul.

"This is a state's rights issue," Hensley told the committee. "We are exercising our state sovereignty and maintaining as much decision making authority as possible."

The bill calls for creating a 16-member board to oversee the marketplace. The board, with members appointed by the governor and subject to Senate confirmation, would include consumer advocates, insurance officials, small business representatives and health care providers. Two non-voting board seats would be reserved for the director of the Idaho Department of Insurance and the director of the Department of Health and Welfare.

Hensley also emphasized that creating the exchange and board to oversee it is not the same as creating a new state government agency. Otter's bill requires the exchange to function as a quasi-governmental entity mandates that it operate without any state funding. The projected startup cost of $20 to $30 million would come from the federal government, Hensley said.

Employees of the exchange would not qualify as state workers, though the exchange would be subject to state open meeting laws and the board would be required to report annually to the governor.

The board is responsible for crafting a plan to make the exchange self-sustainable, according to the bill. Money needed to operate the exchange and pay its staff would come from fees assessed to people or companies that buy or sell insurance products, projected at about $10 million each year, Hensley said.

The bill also carries an emergency clause, which means the law goes into effect immediately after the bill is signed by the governor.

"Time is of the essence in this case," said Hensley, pointing to a Jan. 1, 2014, deadline to have the marketplace up and running.

Otter's decision to promote a state-run exchange emerged from the recommendation of a task force he appointed last year to study the issue and political realities beyond the state's borders. After the U.S. Supreme Court upheld the federal health care law last summer and voters re-elected Obama in November, Hensley said it became clear Idaho had to take matters into its own hands.

The Republican governor, who once led the drive by states challenge the health care law in court, also went on the offensive Tuesday to win support for his proposal. On his website, Otter encourages citizens to sign a petition urging lawmakers to get behind a state-crafted exchange.

"It's time for Idahoans to tell their elected officials that they want Idaho to be actively engaged in the decision-making process by taking a seat at the table," Otter said in a newsletter posted on his website.

The committee has not yet set a hearing on the bill, and there is no guarantee it will have a smooth ride through the Senate or House.

Some Republicans may be tough to convince and at least one conservative group launched its own online petition drive Tuesday. The Idaho Freedom Foundation, a privately funded conservative lobbying group, argues that a state exchange simply paves the way for a federal takeover of the health care industry.

"The health insurance exchange, like the Medicaid expansion, is nothing more than a multi-billion dollar boondoggle the cost for which will be borne by future generations," according to the petition posted online. "Idaho Freedom Foundation will do everything it can, along with other opponents of Obamacare, to make sure that Idaho legislators are fully educated on the dangerous consequences of implementing this destructive law."