State on wrong track with health exchange


March 23, 2012 9:55AM

Marking the second anniversary of Obamacare’s enactment and days before the Supreme Court hears its case, Beacon CEO Justin Owen teams up with the American Legislative Exchange Council’s Christie Herrera to pen an article in the Tennessean. The article warns state leaders against implementing a state-run health insurance exchange. Read the entire article below or by clicking here.

Despite openly expressing his opposition to the health care overhaul, Governor Bill Haslam has taken steps to establish a health exchange—a key component of the law designed to regulate and subsidize health insurance—in Tennessee. He believes that “Tennessee risks losing millions of dollars in federal grant money if he allows the legal and political challenges to the federal health care law to play out before establishing an exchange.”

To date, only seventeen states have formally established a health insurance exchange; the other thirty-three states have either rejected the idea or are still weighing options. It’s time for Tennessee to do the latter.

First, there’s no material difference between a state-based exchange and a federal one. The President claims that states have “flexibility” in setting up an exchange that’s right for them, but in reality a state exchange just means more federal control. Under the President’s health reform law, every aspect of a state exchange must be approved by bureaucrats in Washington.

Second, there’s no imminent threat of a federal exchange. State exchange proponents often claim that, “If we don’t set up an exchange, the federal government will do it for us.” But the federal health law does not provide any funding to set up a federal exchange, nor does it provide subsidies for people to buy insurance in a federal exchange. And the U.S. Department of Health and Human Services has recently extended exchange planning and grant deadlines until 2015. All of this uncertainty means one thing—Tennessee has time to plan and decide how, or whether, it would like to set up its own exchange, without a legislative rush to judgment.

Third, it’s costly. The amount of federal money Tennessee will get to establish the exchange will pale in comparison to the tremendous financial burden that will be transferred onto Tennessee taxpayers in the long-run. That’s because in 2015, the federal money runs out, and state exchanges will have to pay for themselves.

Some states are considering taxes on health insurance premiums, doctors, and “sin taxes” to pay for their exchanges; others have considered cutting education, law enforcement, and other state programs to find the money. None of these options is right for Tennessee.

Finally—and most importantly—setting up a state exchange means further entrenching the federal health law in Tennessee. State officials who are serious about seeing the federal health law repealed or declared unconstitutional should stop hedging their bets by taking measures to implement a health exchange. It undermines the legal argument that the law is unconstitutional and sends the wrong message to the U.S. Supreme Court.

It’s not too late for Tennessee to reject a health insurance exchange altogether and return Washington’s $3.7 million bait money. Once the decision is made to establish the bureaucracy of a health exchange, it will be nearly impossible to take that decision back.

Justin Owen is president & CEO of the Beacon Center of Tennessee, an independent, nonprofit and nonpartisan research organization dedicated to advancing free market policy solutions in Tennessee. Christie Herrera is director of the Health and Human Services Task Force at the American Legislative Exchange Council, a nonpartisan, nationwide association of state lawmakers.