Kasich Administration Will Not Create Ohio Obamacare Exchange, Unlikely to Expand Medicaid

Published August 16, 2012

Despite the Supreme Court’s decision to uphold the individual mandate, Ohio Department of Insurance Director Mary Taylor announced Ohio will not create a health insurance exchange as directed by President Obama’s health care law.

In a press call following the U.S. Supreme Court’s decision upholding most of the law, Taylor—a Republican who also serves as Ohio’s lieutenant governor—said the state will allow the U.S. Department of Health and Human Services (HHS) to implement a federal exchange in Ohio rather than comply with the law’s expansive regulations regarding state-operated exchanges.

“We believe today, as we have been saying, that the best solution is for Congress to repeal Obamacare, and our hope is that a new White House and a new Congress will ultimately achieve that next year,” Taylor said.

Cost Part of Equation

In May, Taylor said no decision about Ohio’s health insurance exchanges had been made, pending Supreme Court deliberations. Now that the decision has come down, she said the costs involved still gave the administration pause.

“At this point, [Gov. John Kasich] and I don’t see how it is in the best interest of Ohioans to have a state-run exchange,” Taylor said. “Quite frankly, we don’t even see where the additional money would come from in order for us to run that exchange. We estimate, based on the reports that were issued last year by the Department of Insurance, that it would be an additional $43 million in new state money, on an annual basis, in order for us to run a state-based exchange.”

Taylor also cited Obamacare’s complexity, ill-defined rules, and onerous federal regulations as reasons the state has decided against exchange implementation.

“The cost is but one reason, but there are also additional questions around: Do we have the options or the flexibility to ultimately have an exchange that’s best for Ohio?” Taylor explained. The administration concluded such flexibility does not exist, she said.

‘Lesser of Two Evils’

Taylor said the Kasich administration decided an HHS-managed exchange, which Obama’s law mandates in the absence of a state-created exchange, is the best path for Ohio.

“Clearly, the governor and I are opposed to Obamacare, period, and we believe the best solution is for it to be repealed and to give states the flexibility to deal with these kinds of issues in the way that’s best for each state,” Taylor said. “We have concluded, again, at this point, that it’s the lesser of two evils—but it’s not where we would be [if] given an option to have Obamacare repealed.”

Questioned about the possibility of a “hybrid” exchange managed by a partnership between Ohio and HHS, Taylor replied she is “waiting on additional guidance from HHS and the federal government. They need to clarify the rules around what a partnership means in order for us to make that decision, ultimately. And of course once we get additional guidance from HHS we’ll be better positioned to say.”

Medicaid Expansion Also Unlikely

With the Supreme Court’s decision that the federal government cannot make existing Medicaid funds contingent on broader eligibility rules, Taylor indicated Ohio is unlikely to pursue the Medicaid expansion.

“When we talk about the additional spending, we’re talking about what it’s going to cost not only to operate the exchange on an annual basis, but we also have to take into account the additional $369 million that we’re obligated to spend on Medicaid,” Taylor said.

Ohio Medicaid director John McCarthy said the state expects to spend an additional $369 million on Medicaid in 2014 even without expanding eligibility, as an estimated 319,000 currently eligible Ohioans will enroll in Medicaid because of the individual mandate.

“All of the reforms that we’ve been doing in the last budget, trying to get savings, we haven’t come close to getting $369 million in savings to cover that cost,” McCarthy warned.

And even without opening enrollment to more citizens, Ohio’s Medicaid costs are expected to rise dramatically. McCarthy said that by 2018 the state expects to have 440,000 new Medicaid enrollees under current eligibility rules, at a cost of $675 million to the state.

Other States May Follow Suit

Senior policy analyst Hadley Heath of the Independent Women’s Forum says the Medicaid expansion ruling is a silver lining in the court decision that gives Ohio and other states the ability to reject a costly entitlement expansion.

“I think the Medicaid expansion ruling was a win for the states,” Heath said, “but only time will tell how that will play out.”

Heath says the expansion ruling could give states leverage to demand more flexibility from the federal government in the form of block grants.

“Additional flexibility for states should come with a greater responsibility for them to find the right solutions that work for their state,” Heath said. “Hopefully, they’ll embrace reforms that are more like the pilot program in Florida that gives Medicaid beneficiaries a little more personal choice, a little more personal responsibility in their care.”

Heath says these reforms are far more beneficial than simply expanding the program as Obama’s law does.

“Better flexibility should lead more market-friendly states to embrace a better direction for Medicaid, since the federal government seems hesitant to do any Medicaid reform that would actually benefit the people on the program,” Heath said.

Jason Hart ([email protected]) writes for Media Trackers Ohio.