Ten Reasons to Avoid a State Health Insurance Exchange

Proponents of the Affordable Care Act (ObamaCare) health insurance exchanges will argue that the state setting up its own exchange, instead of the federal government, will give the state more flexibility and allow free market concepts into the exchange’s operation.  Sadly, the idea of a “free market exchange” is a contradiction in terms.  States will be burdened with all of the regulatory and administrative rules imposed by federal law with very little opportunity to respond to changes in competition and market costs. Therefore, the Civitas Institute has provided ten reasons why the ObamaCare exchange is not a good policy for North Carolina.

(1) ObamaCare’s Constitutionality Still in Question

  • U.S. Supreme Court will likely take up the federally intrusive bill in June 2012. An exchange need not be set up until 2013 at the earliest (only “measurable progress” necessary).
  • The first grant application must not be submitted until June 29, 2012, the same timeline of the likely Supreme Court decision. Why would North Carolina waste time, money and resources setting up an exchange until ObamaCare’s constitutionality is determined?
  • NC Legislature signed amicus brief in support of ObamaCare’s constitutional challenge.  It’s important to stick by those principles.

(2) Taking Wait and See Approach Allows for More Options

  • Stakes for waiting are low.  Federal government will build an exchange if states fail to act.  Under federal HHS guidelines, states may start their own exchange if they do not like the federally-implemented exchange.
  • In addition to the Supreme Court challenge, Congress could repeal ObamaCare after the next election or the next President could act to counter its provisions.
  • By waiting, North Carolina may gain knowledge from other states exchange experiences.

(3) Setting Up an Exchange Increases Validity of ObamaCare

  • ObamaCare is an intrusion into the personal lives of our citizens – against personal freedom and a sound economy.
  • By setting up an exchange, North Carolina would be voluntarily subjecting itself and its citizens to federal control, further damaging the ObamaCare legal challenges.
  • Each state exchange is another “notch” of validity.
  • Implementation creates a tax-funded lobbying and agency core with vested interest in continuing an exchange and Obamacare.  Once a government program begins, it is difficult to end. Therefore, the “kill” provision in HB 115 is not enough.

(4) Federal Money Will Run Out

  • Initial federal start-up funds will end by the close of 2014, leaving the states to be burdened with the costs.
  • Federal government may not have enough resources to implement federal exchanges in each state, essentially delaying or even eliminating exchanges in states without state-run exchanges.
  • Federal money is not free.  North Carolina taxpayers pay federal taxes and contribute to these funding pools.

(5) Feds Will Call the Shots

  • “State-run” exchange is a myth.  Excessive regulatory requirements will ensure state exchanges are nearly uniform and subservient to federal control.  All exchanges are subject to federal approval.
  • The Federal government will determine who can participate, both on an individual consumer and corporate insurance level.  States can only offer additional prohibitive and cost-increasing mandates.
  • Federal government bureaucracy leads to government expansion, encroaching on state and individual rights and escalating healthcare costs.

(6) Exchange will Enforce the Individual Mandate

  • While a federal exchange would also enforce the mandate, North Carolina should not encourage implementation of the individual mandate and its penalties by setting up an exchange.
  • State exchanges are responsible for reporting whether an individual is exempt from the individual mandate and for granting certification for those who are exempt and must follow federal guidelines.

(7) Feds Require Sensitive Data from States

  • ObamaCare requires the exchange to give to the U.S. Treasury the names and taxpayer identification numbers of individuals who have changed employers and ceased coverage under a qualified health plan during a plan year.
  • The exchange must report an individual unsuccessfully seeking an exemption from the mandate via the exchange or otherwise subjecting himself to the exchange, but then choosing not to purchase insurance.
  • Other sensitive healthcare information may be shared with the federal government, which has lost valuable data to hackers and glitches in the past.

(8) State Exchange Cannot Be “Free-Market”

  • Government chooses every aspect of the exchange.
  • In a free market, insurance companies and consumers can:
    • Respond to changes in cost
    • Cost compete with one another
    • Freely enter and exit market as they choose
    • Decide on what services to cover or purchase in insurance plans

(9) Exchange Will Interfere with Existing Health Coverage

  • Employer fines under ObamaCare will be less than the cost of providing coverage in many circumstances.
  • Employers will be incentivized to drop employee insurance plans and encourage them to seek subsidized plans on the exchange. 

(10) Exchange Will Not Control Rising Costs of Healthcare

  • The Congressional Budget Office (CBO) predicts the average insurance premium per person covered (including dependents) for new non-group policies will be between 10 percent to 13 percent higher in 2016 than the average premium for non-group coverage in that same year without ObamaCare.
  • After the Massachusetts individual mandate and exchange program was implemented premiums rose considerably.
  • Taxpayer obligations will also increase.  The CBO believes federal healthcare commitments will rise by $400 billion between 2010 and 2019.
This article was posted in Healthcare by Karen Duquette on December 14, 2011 at 9:00 AM.

© 2011 The Civitas Institute. Visit us on the web at www.nccivitas.org.
This article can be found at https://www.nccivitas.org/2011/ten-reasons-to-avoid-a-state-health-insurance-exchange/

Comments on this article

  • 1

    Richard Strube
    Richard Strube Dec 14, 2011 at 9:53

    I think our state should stick to the constitution, federal involment has raise the cost of health care with medicare and medicade. Lets try a freemarket and see how compitition could lower prices. Besides our state needs to get its house in order and pay off our debt. Free spending politicians have put our state in trouble.

  • 2

    Truth teller
    Truth teller Dec 19, 2011 at 15:53

    An amazing amount of myth, distortion, and misinformation here. You may not like the ACA, but let’s at least have an honest discussion of what is and is not in the law and, importantly, what other alternatives there are for reforming our disgraceful health care system.

  • 3

    fireobamain2012 Jan 01, 2012 at 1:55

    When there is a 2700 page law there is no law. That much legislation encourages anarchy and black market growth. So, obamacare will only limit our access to doctors and hospitals which is his plan.

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