Wisconsin’s Walker Rejects Health Insurance Exchange Funds

Published February 20, 2012

Republican Gov. Scott Walker of Wisconsin became the most recent governor to reject implementation of the health insurance exchanges mandated under President Obama’s health care law, saying he will return the $38 million federal taxpayer-funded grant provided to his state.

Several states, including Oklahoma, Louisiana, Kansas, and Florida, have already decided to return federal funding designed to cover the costs of setting up an exchange. As of February, only 15 states had made significant progress toward establishing an exchange under Obama’s law, with the remaining 35 having either halted implementation or decided against any action.

‘It Doesn’t Make Sense’

Last year, Walker set up the Office of Free Market Health Care, a collaborative office designed to evaluate the effect of Obama’s health care law in the state and develop an initial insurance exchange plan for consideration by the legislature. But in recent months the governor has become more openly critical of federal restrictions on the exchange, and he disestablished the Office of Free Market Health Care.

In a Jan. 18 statement Walker said the state would “discontinue any development on a health exchange,” adding, “stopping the encroachment of ObamaCare in our state, which has the potential to have a devastating impact on Wisconsin’s economy, is a top priority.”

“When job creators and Wisconsin families are facing difficult times, it doesn’t make sense to commit to a federal health care mandate that will result in hidden taxes for Wisconsin families, increase health care costs and insurance premiums, and more uncertainty in the private sector,” Walker said in the statement.

Short-Term Funding, Long-Term Costs

Though the grant Walker rejected from the federal government was intended to provide initial funding, the long-term expenses for states could grow exponentially, notes Nicole Fisher, a senior policy director for Health Systems Innovations and a fellow of the American Action Forum.

“We don’t know what it’s going to cost between companies having to change their requirements, having to change their plans, even something as simple as filling out paperwork to be part of the exchange.… There are all kinds of silly regulatory costs,” said Fisher.

Fisher says information security is another concern, as an online health provider shop will require consumers to give out sensitive information.

“For an exchange to function as well as the government claims it should, they’re going to need real-time data,” she said. “That’s income data, citizenship data, health care data, access to medical records. To have access to all this government data and to hire companies who can manage all this data will cost money.”

Fisher says Walker’s decision to return the money will free the state from the attached requirements.

“Clearly, under a free-market mentality the default answer is it should be left up to the state,” Fisher said. “With exchanges, ultimately, it’s a good idea if it works out the way [the government] claims it will. In theory that’s fabulous. In reality I don’t see how it’s possible. Every plan is going to have to change their criteria.”

Washington’s Strings Attached

Insurance exchanges are only part of Wisconsin’s concern regarding federal mandates, according to Michael Ford, research director at the Wisconsin Policy Research Institute.

“The experience with No Child Left Behind that Wisconsin and other states are going through is instructive,” said Ford. “There are always strings attached to federal money.”

Forced implementation may become a moot point after the Supreme Court rulings expected this spring concerning other aspects of Obama’s health care law, Ford notes.

“Conceptually, the idea of a market-based insurance exchange makes a lot of sense,” Ford said. “That said, we certainly sympathize with the position to not set up a new government entity that is just going to get struck down.”

Fisher says the need for Walker’s decision illustrates how Washington red tape overrules state and local interests.

“Ultimately, the federal government is giving so much regulation with this bill, you can try to set up an exchange and make it as free-market and local as possible—but still 95 percent of it is dictated from Washington,” Fisher said.