Legislators could be presented the issue in their 2012 session, but two bills to create an exchange died in the 2011 regular session amid strong opposition by many majority Republicans to the overhaul.

Some legislators "said they didn't want their fingers anywhere near as to what is seen as Obamacare," said Rep. Nancy McLain, a Bullhead City Republican who sponsored one of the exchange bills.

The Children's Action Alliance, the Arizona Public Interest Research Group and other social-service advocacy groups on Monday released recommendations calling for creation of an exchange that emphasizes transparency, affordability and convenience for consumers, with broad-based financing drawn from fees paid by insurers whether operating in the exchange or not.

"It would be better for us to move forward quickly and in a manner that has consumer protection first and foremost," Arizona PIRG executive director Diane Brown said.

Republican Gov. Jan Brewer's administration has accepted a nearly $1 million federal grant for planning a state exchange, but spokesman Matthew Benson said Brewer is still considering her options on the issue while favoring an approach focusing on "market competition."

Benson said Brewer's health policy adviser, former insurance lobbyist Don Hughes, "is doing the spadework to see if an exchange makes sense in Arizona," Benson said.

Though Brewer would prefer that courts overturn the health care overhaul, "it would be irresponsible to not do some of the background work so that Arizona is prepared in case all or part" of the overhaul takes effect, Benson said. "And there are a lot of benefits to having an exchange managed and developed at the local level as opposed to the federal government."

McLain said she also favors repeal of the health care overhaul but concluded that the state would be better served with preparing to chart its own course in the meantime, particularly because it doesn't appear a U.S. Supreme Court ruling on the constitutionality of the overhaul is coming before the Jan. 1, 2013 deadline.

"If we take some steps now and make it as free market as possible and as finely tuned to Arizona needs as possible, then we can live with that," she said.

In the 2011 session, a Democratic senator's bill to create an exchange never even got a hearing, while McLain's bill had health insurance industry backing and emerged from a House committee on a 4-2 vote in February.

However, it then disappeared from view, never advancing to the full House.

McLain said her bill ran into trouble when it drew criticism from the Goldwater Institute, a conservative think tank with the ear of many Republican legislators.

Goldwater economist Byron Schlomach said state creation of an exchange could undermine Goldwater's argument in its pending legal challenge to the overhaul, specifically the argument that it tramples on state and individual rights.

"There's inherently a kind of conflicting signal that you're giving to jurists as well as the general public," he said Monday.

And Schlomach said he doesn't buy the argument that Arizona helps itself by creating an exchange instead of letting the federal government do it.

With the requirements of the overhaul law and the numerous regulations it is spawning, "the federal government is determining the makeup of the exchange, not the state," he said.

McLain said she's not inclined to propose exchange legislation again unless there's buy-in from Brewer and House and Senate leaders.

And some lawmakers "don't want to be anywhere near it" and would just as soon have Brewer create an exchange without asking for legislative authorization.

Benson said Brewer only needs legislative approval for funding for an exchange. However, "the governor believes in working with the Legislature on this issue … and mutual accommodation in deciding whether to pursue a state-level exchange or not."