Why States Should Run From PPACA

States should not implement health insurance exchanges as defined by Obamacare. There is no fiscal advantage to doing so. An exchange will not improve life for a state’s citizens, and there is great risk of political liability for officials responsible for an exchange. 

The House Energy and Commerce subcommittee on Health held a hearing today at 10:00am to try to pry from DHHS bureaucrats answers to some of the huge number of unanswered questions about implementation issues facing the states. See below for a list of the questions.

You can find out where your state stands and help block the further expansion of government into health care.

Douglas Holtz-Eakin writes at NRO  that since Obamacare was passed and upheld in the courts, President Obama’s reelection represents the third strike against repeal efforts, and therefore against efforts to combat the implementation of state exchanges. That presumes, however, that state-based exchanges are a worthwhile endeavor.

Mario Loyola, also at NRO, counters:

Holtz-Eakin’s basic position is that states will be able to control many aspects of the exchanges and that’s better than letting the federal government set them up and control them

… which they will not be willing to do. Loyola quotes Holtz-Eakin:

States can, and should, control their destinies by deciding how their exchanges will function, which private insurance companies can participate, and what kind of insurance coverage will be offered.

Deciding which private insurance companies can participate in the marketplace should not be a function conservatives want government to pursue.

States will not be able to shape their exchange marketplaces in any meaningful way beyond choosing the individual companies involved, based on little more than how effective the companies are at lobbying. It is a recipe for cronyism, kickbacks, and corporatism. 

“One of the most important limits on federal power,” continues Loyola, “is that the feds normally have to implement and be accountable for their own policies. It is precisely that limit that the federal government escapes when it deputizes state governments into doing its bidding.”

Holtz-Eakin says that the federal exchanges (which are really to be one exchange tailored by ZIP code) are a trojan horse for single-payer. 

Implementation opponents respond with a modified Cloward-Piven strategy: if the feds want to build an exchange to serve the states, let them try. Since they can’t the way Obamacare is designed, the whole law will have to be reopened and then can be shelved for real, presumably bipartisan, reform.

The Cato Institute’s Michael Cannon lists the reasons not to implement. Summarized, they are:

1. States are under no obligation to create one, and can always create an exchange later if they choose. 14 states have laws or constitutional provisions against doing so.
2. A state-created exchange is not a state-controlled exchange. All exchanges will be controlled by Washington.
   
3. Creating an exchange sets state officials up to take the blame when Obamacare increases insurance premiums and denies care to the sick. State officials won’t want their names on this disastrous mess.
4. The arbitrary December 14 deadline is no different that the arbitrary November 16 deadline, or the “deadlines” for implementing REAL ID, which have been pushed back repeatedly since 2008.
5. Each exchange would cost its state an estimated $10 million to $100 million per year, necessitating tax increases.  The grants to create the exchanges only last the first couple of years, after which states are on their own. Nina Owcharenko and Edmund F. Haislmaier of Heritage note that just running the exchanges will add about 3.5% overhead to the cost of insurance.
6. Congress must authorize funds for federal “fallback” exchanges before they can operate, giving the House leverage.
7. Creating an exchange would be assisting in the creation of a “public option” that would drive domestic health-insurance carriers out of business through unfair competition.
8. Obamacare remains deeply unpopular. The latest Kaiser Family Foundation poll found that only 38 percent of the public supports it.
9. Defaulting to a federal exchange exempts a state’s employers from the employer mandate. Jimmy John Liautaud, founder of Jimmy John’s subs, said Obamacare implementation would cost 50 cents per sandwich, without insuring anyone or paying a single fine. “If you have 40 or 50 employees at a restaurant, and the penalty is $2,000, and you’re going to pay $80,000 or $100,000 penalty, there goes the profit in your restaurant.”
10. Avoiding those taxes improves a state’s prospects for job creation, and protects the conscience rights of employers and individuals whom the Obama administration is forcing to purchase contraceptives coverage.
11. Rejecting an exchange reduces the federal deficit. Obamacare offers its deficit-financed subsidies to private health insurers only through state-created exchanges. If all states declined, federal deficits would fall by roughly $700 billion over ten years.
12. The Obama administration has yet to provide crucial information that states need before they can make an informed decision. Ahead of today’s hearing, unanswered questions include:
    •  What benefits must be included in qualified health plans under rules dictating “essential” health benefits?
    • When will HHS reveal the operational details of the federal exchange?
    • Has HHS accounted for the subsidy cliff included in PPACA that dramatically increases an individual’s and family’s exposure to the law’s premium increases?
    • Has HHS considered the potential disruption to insurance markets due to the details of the law’s government-run plan administered by the Office of Personnel Management?
    • Will States have the ability to opt in or out of an exchange management on an ongoing basis given the lack of information related to the operation and cost of these exchanges?
    • Will the Administration again change deadlines related to implementation of State exchanges given the lack of information provided by the Administration?
    • Will States that expand Medicaid coverage up to a level below 133 percent of the Federal poverty limit (FPL), for example up to 100 percent FPL, still receive the enhanced Federal medical assistance percentage (FMAP) available for “newly covered” populations?
    • Will States be allowed to phase in Medicaid coverage up to 133 percent of FPL in years after 2014 and still receive the enhanced FMAP?
    • If a State opts not to pursue Medicaid expansion as written in the PPACA, what other Medicaid provisions of PPACA would apply to their State programs? Specifically, do financial penalties associated with the PPACA Maintenance of Effort provisions still stand?
    • What options and Federal assistance are available for States that decide not to pursue Medicaid expansion as written in the PPACA?
    • What additional flexibilities are available to States that may be considering an expansion but conclude the financial sustainability of such a policy requires greater State autonomy in managing their Medicaid programs?
    • Regarding the two-year increase in Medicaid reimbursement for primary care codes, are States expected to maintain the additional billions in spending after 2014?

States should not implement health insurance exchanges as defined by Obamacare. They limit freedom. The only people to win with a state-based exchange are the politically connected cronies. Voters unhappy with the direction of health care reform will surely punish those officials who line their own pockets in pursuit of it.