Policy Tip Sheet - State Health Insurance Exchanges Post SCOTUS

State Health Exchanges Post SCOTUS

     
The Issue in Brief

In the wake of the U.S. Supreme Court decision upholding most of the Patient Protection and Affordable Care Act (PPACA), states will be pressured to establish federally regulated and approved health insurance exchanges by 2014. If a state opts not to create its own exchange, PPACA provides the federal government will implement one for the state.

To date, 15 states have begun the process of establishing an exchange. Many others have resisted moving forward, for the following reasons:

1. No matter the type of exchange, states will not have full authority over their own health care systems. As stated by the final HHS exchange rules, “The Affordable Care Act does not contemplate divided authority over an Exchange.”
2. The final exchange rules still do not explain all the necessary requirements. With incomplete information, states that move forward with implementing an exchange risk investing valuable time and taxpayer dollars only to discover their exchange does not comply with federal regulations.
3. The threat of a federally run exchange is hollow: PPACA does not provide the federal government with adequate funding to set up or operate federal health insurance exchanges.
4. Implementing an exchange will result in high administrative and operational costs, and those costs will rise soon after initial implementation. Federal funding for exchanges is expected to run out by 2014, making state spending increases inevitable.
As the federal government continues to take control over health care from the states while cutting funding, state officials should resist setting up health insurance exchanges.

Policy Message

Point 1: Exchanges must be approved by the secretary of the U.S. Department of Health and Human Services (HHS). Several states already have sent exchange models to Washington, only to have them rejected.
Point 2: There is no such thing as a "state" exchange under PPACA.
Point 3: Financial assistance from the federal government will end by 2014, forcing states to look for ways to compensate, thus increasing state spending.
Point 4: Millions of hard-working Americans are likely to be dropped from their existing health insurance plans and forced into flawed bureaucratic exchanges.

Policy Facts

1. Control over health insurance exchanges will reside with the federal government, not the states.1, 3  
2. PPACA does not provide funding to set up or operate federal exchanges. Section 1311 of the law provides for federal premium subsidies (tax credits) only in state exchanges. No such funding exists for federal exchanges.4 
3. Only two exchanges are currently in operation in the United States: Utah’s exchange and the Massachusetts Commonwealth Connector. Both have failed to produce low-cost or consumer-driven health care.1, 2  
4. Massachusetts spent more than $29.4 million in 2009 alone on the Commonwealth Connector, not including the high administrative costs.1
5. Health insurance in Utah is more costly inside the exchange than on the market.3 

References

1. "State Insurance Exchanges: The Case Against Implementation." The Heartland Institute. <http://heartland.org/policy-documents/state-insurance-exchanges-case-against-implementation>2. "Lessons From Utah Health Insurance Exchange." Low Cost Health Insurance. <http://www.californiahealthplans.com/blog/2010/10/lessons-from-the-utah-health-insuance-exchange/>3. "Should Michigan Create a Health Insurance Exchange?" Mackinac Center. <http://www.mackinac.org/15237>4. Michael Cannon, "Latest ObamaCare Glitch Enables States to Block New Entitlement Spending." Cato Institute. <http://www.cato-at-liberty.org/latest-obamacare-glitch-enables-states-to-block-new-entitlement-spending/>

For more information on health care policy contact:Kendall Antekeier, Manager of External Relations and Legislative Specialist - Health Care Policy, at kantekeier@heartland.org