Why states should move forward with health insurance exchanges

David Merritt Managing Director, Luntz Global Partners
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Imagine that you’re being required to buy a car. You will have to pay for most of it, but you can’t choose exactly what you want. There are so many restrictions on your options that you’re forced to choose from a few used, four-cylinder, two-door sedans with manual transmissions. And there’s one more catch: If you don’t choose one yourself, the dealer will decide for you.

It’s not an enviable position to be in, but most of us would grudgingly decide that if we have to get one of the cars, it’s better to have a small say in what we get than to have someone else decide for us.

This is the same predicament that many state policymakers find themselves in regarding the creation of health insurance exchanges.

Health insurance exchanges are a key part of the health reform law. Supporters argue that exchanges will provide consumers with valuable information on their coverage options, while at the same time providing stricter regulation of health insurers. They are also the only way people can benefit from the lavish subsidies included in the law.

On Monday, the Department of Health and Human Services released a final rule governing the exchanges. The rule sets an ambitious timeline for getting the exchanges up and running in every state by January 1, 2014. Between now and then, states can either build their own exchanges and tailor them as much as federal law will allow or decide not to build exchanges at all.

But there’s a catch: If states don’t build their own exchanges, the federal government will do it for them.

Governors like Bobby Jindal in Louisiana and Rick Scott in Florida, who are not only national conservative leaders but health care experts, are staunchly against any state action on exchanges. Legislators in other states, such as Oklahoma, Wisconsin and Missouri, have blocked efforts to build exchanges in their states.

That is a principled and understandable position. Many see building an exchange as an endorsement of the law, which virtually all conservatives are loathe to do, particularly those who represent states that have filed suit against the law.

Many, like Bob McDonnell, governor of Virginia and chairman of the Republican Governors Association, say the rules are overly prescriptive: “The regulations issued today by the Department of Health and Human Services extend the federal government’s reach into the states and will cost the states millions of dollars annually to operate.”

Still, if states do not move forward on their own, the federal government will. Because of this fact alone, states should move forward with creating their own exchanges. It’s better for states to exert some control over the structure of their exchanges than to abdicate control to Washington.

Plus, no one knows what a federal exchange would look like.

Take, for example, the treatment of high-deductible health plans with health savings accounts. A state exchange could and should include them as an option. They have proven to lower costs and expand consumer choice. But considering that many on the left oppose consumer-directed plans, a federal exchange may very well exclude them.

Perhaps a federal exchange will lard mandate upon mandate on participating plans, driving costs through the roof. Perhaps it will be so restrictive in its plan eligibility that only a few options will be available. Perhaps HHS will offer a public option.

We simply don’t know what a Washington-controlled exchange will look like — but it’s safe to assume that folks in states like Oklahoma won’t like it.

Unless and until the law is repealed by Congress or overturned by the Supreme Court, all health care stakeholders — including state policymakers — need to prepare for it as though it will be the law of the land forever. Wishing the law away is not a strategy. Hoping that it is overturned is not a plan.

Brian Robinson, a spokesman for Georgia Governor Nathan Deal, captured it best last year: “The governor has to follow federal law as it stands. If Georgia must have an insurance exchange under federal law, the governor wants to ensure that our exchange is established by and run by Georgians. The alternative is having an exchange established by and run by Washington bureaucrats. The governor considers the latter unacceptable.”

There is no doubt that state lawmakers are in a bad position, and neither choice is a good one. But controlling what they can and keeping Washington out as much as possible is what’s best for their states’ residents.

David Merritt is the former CEO of the Center for Health Transformation and the Gingrich Group and currently a senior adviser at Leavitt Partners.