States Call Obamacare’s Bluff

Imagine you’re asked to go to dinner, and your dinner date chooses your entire meal for you (of course, he claims his choices are the best the menu has to offer, regardless of your gluten allergy or dislike of rare beef). You enjoy the meal regardless your impending indigestion—until the check arrives. He asks you to pick up the whole tab and, while you’re at it,  leave a generous tip.

Beyond ObamacareAccording to state policy analyst Nicole Kaeding, this scenario is a lot like the state-run healthcare exchanges suggested by the Patient Protection and Affordable Care Act (Obamacare). An exchange is a government-controlled, Web-based health insurance marketplace. But unlike an innovative, free marketplace that adjusts to consumer demand, a government-run exchange will be fraught with regulations and mandates. Not to mention a slew of tax increases and increased costs carried by consumers and business-owners in the state.

Today is the deadline for states to decide whether or not they will build a state-run healthcare exchange or leave the set up of exchanges to the architects of the federal program, the Department of Health and Human Services.

On Wednesday, Governor Corbett of Pennsylvania announced that his state will refuse to implement a state exchange . The Commonwealth Foundation’s blog explains why this is a good choice for Pennsylvania and other states:

1. A state-run exchange offers only the illusion of state control. The Department of Health and Human Services can change regulations at any time, effectively having complete control over state governments in regards to health insurance regulations.

2. Costs would be borne by state taxpayers. States will shift the administrative costs to consumers through a new user fee or higher premiums. Some states have estimated this cost to be between $30 and $50 million per year. To fund the federal exchange, HHS will impose a 3.5 percent fee (tax) on all insurance plans sold on the exchange-a charge that will certainly make insurance that much more costly.

3. Exchanges don’t create more robust competition. The mandates and regulations tied to the federally-approved exchanges means less competition, as all health care plans will be pretty much the same.

4. Exchanges won’t lower the cost of insurance. While the law was intended to make health care more “affordable,” the real-world evidence suggests that isn’t happening. Even the most ardent Obamacare backers recognize that “premium growth, although slower than in years past, continues to outpace inflation and wage growth.”

Here is the run-down of where other states stand on exchanges from ABC News:

  • 23 states that have opted out: New Jersey, South Carolina, Louisiana, Wisconsin, Ohio, Maine, Alabama, Alaska, Arizona, Georgia, Pennsylvania, Kansas, Nebraska, New Hampshire, North Dakota, Oklahoma, South Dakota, Tennessee, Texas, Wyoming, Montana, Indiana, and Missouri.
  • Utah already has an exchange, and is still waiting to see if HHS and the White House are going to impose rules and regulations on their existing system.
  • 19 states are establishing state-based exchanges: California, Colorado, Connecticut, Washington, D.C., Hawaii, Idaho, Iowa, Kentucky, Maryland, Massachusetts, Minnesota, Mississippi, Nevada, New Mexico, New York, Oregon, Rhode Island, Vermont, and Washington.
  • 6 federal-state partnerships: Arkansas, Delaware, Illinois, Michigan, North Carolina, and West Virginia.
  • Virginia and Florida are undecided.