States should reject Obamacare exchanges

Nicole Kaeding Budget Analyst, Cato Institute
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One of the most important issues facing states this legislative session is whether to create a health care exchange to implement the president’s health care law. States are being tempted by words like “flexibility” and very large grants from the Department of Health and Human Services (HHS) to gain their compliance, but states that value health care freedom should resist and refuse to implement Obama’s health care exchanges.

Health care exchanges organized voluntarily by market participants are something that conservatives could support. Exchanges should function as a free-market mechanism allowing consumers to make informed health care purchasing decisions in a simple, innovative and transparent manner. Yet, the exchanges as created by Obamacare and HHS fail to meet this most basic standard.

These exchanges pile thousands of pages of rules, regulations and mandates on each state’s insurance markets, harming competition and consumers. Forcing insurers to provide “essential health benefits” under “qualified health plans” with little to no cost-sharing does nothing but raise premiums, a fact even acknowledged by Obamacare’s chief architect, economist Jonathan Gruber. According to a study of the Wisconsin insurance market authored by Gruber, Obamacare will push up individual premiums by an average of 30% in the Badger State.

Conservative proponents of state exchange creation, like David Merritt here at The Daily Caller, argue that states will have “flexibility” if they create exchanges themselves. A review of the facts show this statement doesn’t pass the laugh test.

Just this week, HHS released its final rule governing exchange creation. The 644-page rule included the word “must” over 1,000 times and “require” more than 320 times. The rule gets so specific as to dictate what items a state must include on its exchange website and how its call center must operate. Under the regulation, any state hoping to create an exchange must first apply to HHS using its “exchange blueprint” template. Secretary Sebelius has sole authority to approve or deny the application. Additionally, any “significant change” must also be approved by the secretary.

The rule itself says that the “minimum functions [outlined in the rule] … are a floor not a ceiling.” Proponents like Merritt argue that if a state doesn’t create an exchange, the federal government will. Under these thousands of pages of regulations and frameworks established by HHS, there is no distinction between the two. States only have the option to further concentrate control in the hands of bureaucrats, not keep it where it belongs: between patients and doctors.

After all of this, even if a state wanted to create an exchange, it would be an almost impossible task. To create exchanges, states must receive approval from HHS by January 1, 2013, which is a little more than nine months away. States would need to rush to create a large Web portal that allows insurers to market their products, helps consumers shop for and purchase insurance and interfaces with various state and federal agencies to provide eligibility and enrollment decisions in hours, not weeks. It would need to be far more complex than the Travelocity-style website proponents describe.

Finally, this whole process begs the question as to why the federal government wants the states to create the exchanges in the first place. The answer is quite simple: The federal government doesn’t have the ability or funding to create a federally operated exchange for every state. President Obama’s newest budget requests an additional $1 billion for HHS to create the federal exchange — $1 billion was previously appropriated — but this request will not pass Congress.

Additionally, due to a drafting error in the rush to pass the bill, Congress did not provide tax subsidies to aid individuals’ purchases in federal exchanges, only in state exchanges. That means businesses in states that do create state exchanges will face higher fines than businesses in states that do not. Further, the federal government isn’t even certain it can create a functioning federal exchange by open-enrollment on October 1, 2013.

The bottom line is that the promises of flexibility are illusory, and conservatives should not assist the federal takeover of health care by implementing health care exchanges. States should just say no to Obamacare.

Nicole Kaeding is the state policy analyst at Americans for Prosperity, which tracks state health care exchanges at www.AmericanHealthCareFreedom.com.

Tags : obamacare
Nicole Kaeding