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The Practical Reasons To Not Set Up Health Insurance Exchanges

By: streiff (Diary)  |  December 14th, 2012 at 03:32 PM  | 

RESIZE: AAA

One of the key features of Obamacare is the establishment in each state of a health insurance “exchange” (now known by the abbreviation HIX) where customers would be able to purchase insurance policies eligible for federal subsidies. Much to the surprise of the administration 32 states have declined to participate. The reasons for a majority of states to refuse to participate has less to do with opposition to Obamacare than practical politics.

Predictably, the Obama regime and it enablers are bleating in dismay and accusing Republican governors of betraying their own ideals by refusing to participate in developing state HIX.

Republicans frequently denounce the health-care law as a dangerous overreach of federal power. But now Washington’s role is expanding, and some conservatives charge that Republicans have only themselves to blame.

The vast majority of Republican-led states, faced with a Friday deadline to submit plans for running the insurance exchanges at the heart of the law, have opted instead to relinquish much or all of their control to the federal government.

Just 18 states and the District say they plan to operate their own exchanges, which are slated to begin enrollment in October. In an additional 32 states, the exchanges will be run either entirely by the federal government or a federal-state partnership.

“If you believe in states’ rights and you believe in state control, why would you cede that control?” asked Robert Laszewski, a prominent insurance industry consultant.

A longtime critic of the health-care law, Laszewski argues that Republican state leaders have allowed their ideological and political differences with President Obama to override pragmatic considerations, to the detriment of their residents.

“There’s a lot of cut-off-your-nose-to-spite-your-face going on,” he said.

I don’t know much about Mr. Laszewski’s expertise, outside of suckling at the health care lobbying teat, but it doesn’t extend to politics. The term “state’s rights” is so Democrat and so 1861 that using it in the context of federalism in 2012 is little short of bonejarring. And his assessment of the political landscape marks him as either a knave or poltroon.

New Jersey Governor Chis Christie gave the best reasons for why a state would not participate:

In short, I will not ask New Jerseyans to commit today to a State-based Exchange when the federal government cannot tell us what it will cost, how that cost compares to our other options, and how much control they will give the states over this state-financed option.  We will comply with the “Affordable Care Act,” but only in the most efficient and cost effective way for New Jersey taxpayers.  Until the federal government gives us all the necessary information, any other action than this would be fiscally irresponsible.

In essence, the federalist argument for not participating is that the state government is being directed by the federal government to take on yet another unfunded mandate and administer it according to federal rules and on a federal time table.

The practical reasons are even more daunting. At this point any governor signing up to run a HIX is signing himself and his administration up for an unmitigated headache as the rules are nebulous, the costs open ended, and the potential to torque constituents when they confront Department of Motor Vehicle style customer service when trying to buy health insurance. Eventually the governor and the legislature will have to answer to the voters for that headache.

By refusing to participate, the governor can use the state insurance regulation power to take credit for good things and is free to use the HIX as a punching bag when his constituents complain. It is a win-win.

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  • oneproudpatriot

    I’m still trying to figure out how forcing people to buy private insurance instead of skipping out on emergency room bills that we all end up paying for is a giant liberal victory. Seriously, this is a conservative policy, and the good guys won. If we really want to wean people from the government’s teat we should privatize the VA, which very much is socialized medicine. It’s kind of an embarrassment that American soliders fighting in the name of freedom rely, at the end of the day, on a European style healthcare system. Same goes for our congressmen.

  • streiff

    by the way, Members of Congress buy health insurance just like anyone else does and they can choose from the same range of policies as any other federal employee.

  • oneproudpatriot

    Ah, you are correct. Good to know. I should have double checked that myth before posting (http://www.factcheck.org/2009/08/health-care-for-members-of-congress/). Thanks.

  • lineholder

    OOOOOhhhhh! Love the graphic, streiff. Willing to share the URL on that baby? Please?

  • lineholder

    That’s too simple. Besides, a ehealthinsurance type format isn’t sophisticated enough for the elite Dems. They want a Bentley. A Ford would get us there, but the Dems want a Bentley…high dollar to implement, high dollar to maintain.

  • streiff

    http://vermont-ahs-dvha.blogspot.com/2012/03/vermont-ahs-dvha-projects-update-volume.html

  • gscandlen

    Fact is, the numbers of uninsured will increase under ObamaCare, not decrease. The exchanges allow people to buy coverage whenever they want without penalty. People with few needs — over 50% of us — will see no need to go through the exchange hassle and spend a lot of money on something they don’t need. They will wait until they are sick to get covered.

  • streiff

    agree. so long as the fine remains lower than the cost of an insurance policy I don’t know why I’d buy insurance I didn’t want.

  • greyeagle

    Right, but Congress, Obama, the Democrats, Unions and cronies are exempt from Obamacare.

  • gscandlen

    Right, and even beyond the amount of the fine is the inability to collect it. The IRS is allowed only to seize tax refunds. That means the fine applies only to people who pay income taxes and underestimate their deductions.

  • joshinca

    I’m still trying to figure out how forcing people to buy private insurance instead of skipping out on emergency room bills that we all end up paying for …

    That meme is utter complete rubbish and yet it won’t die.

  • gabriel

    I can respect both sides of this discussion, though I think the refusal to set up exchanges has the better argument. However, there are two Republican-controlled states that are setting up exchanges: Mississippi and Idaho. Perfect lockstep isn’t appropriate in a federal system, so the conservative movement shouldn’t condemn the decisions of these states.

    What we should do, however, is make the case that Mississippi and Idaho should use their exchanges to challenge the unconstitutional overreaching of the federal government. Both states should explicitly refuse to enforce the blatantly unconstitutional contraception/abortifacient mandate as a start by requiring every provider on the exchange to offer plans without the mandate. Let the Obama administration try and hamstring their own exchanges to persecute Christians if they want, but it would be another good basis for litigation challenging the constitutionality of Obamacare.

  • Hafeed

    I’ve used their site on the two occasions I’ve had to buy individual insurance. Really useful site.

  • Hafeed

    There is a second component. One of the great problems with Medicaid and other ‘cooperative’ policies between the federal and state governments is that political accountability is lost in the muddle. A key element to federalism is clear delineation between the levels of government so that political accountability is apportioned accordingly.

  • The_Gadfly

    Since it has become part of the “tax bill” as a result of The Big 0′s lies and Roberts concurrence with those lies, I expect that when push comes to shove not paying your “fine” will result in wage garnishment.

  • The_Gadfly

    There’s an even bigger problem. Friends and I were discussing this yesterday. One of them does point of sale support for a couple of fast food chains. Starting January 1, unless you are management your hours are going to be cut from 38 to 2 hours under Obamacare threshold. Because of how thin margins are, the firm simply can’t afford to pay for healthcare for part timers. Now, while they might not have had healthcare because they were part timers at 38 hours, at least at 38 hours you had a shot at being able to buy catastrophic coverage for yourself. That’s going to be simply impossible with severely cut hours.

  • dpmaine

    Bad debt and/or emergency care debt is a major cost to hospitals. It’s paid for by everyone who can pay – cash, insurance or government payors.

    For emergency care, this is a major driver of costs. Routine problems that a nurse can deal with esclate to the point of major care crisises, and that just drives up the cost way outside what people can pay for. An $80 nurse visit that goes untreated for 6 weeks becomes a 3 day hospital stay for $25k that never gets paid.

  • dpmaine

    That’s basically what they are going to do. The Massachusetts Health Connector is very similiar.

    The main differences are that the exchange sites will be able to (1) qualify and enroll you into Medicaid or Medicare, (2) verify your subsidy, and (3) setup the insurer to receive your advanceable tax credit directly from the government.

    Otherwise, the comparison part, very similiar.

  • dpmaine

    For a lot of people within a year or two that will reach parity, and then the game will be up.

    The average low wage worker will be expected to pay not more than $933/year out of pocket for the premium and cost-sharing. Within a few years the fine will exceed that.

    And that will be the end of resistance. Once people get hooked on the free stuff.. well, just try to cut SNAP funding and see what happens.

  • dpmaine

    This is likely in the long term, but over time, I would wager you’ll just see employers raising prices to cover insurance.

    A few reasons I think this:

    - managing 20 employees working 38 hours a week or managing 38 employees working 20 hours a week makes a big difference in cost. That’s a lot more scheduling, a lot more people to keep coming in, and a lot more turnover.

    - Many people working 20 hours a week will be working more than 1 just at that pace. Probably 2 or 3. It is possible that there may not be enough workers at that availability to meet demand. That will drive up wages. This is obviously not desirable. Finding good part timers can already be difficult in some markets.

    - The scheduling options of trying to cover a 24/7 operation with people not working more than 20-24 hours a week is very tricky. In competitive markets these places are open around the clock. It’s already hard to get overnight workers. They already often have a shift-differential.

    Under the ACA as it stands now, that employee will be able to qualify for a subsidy to buy a private plan, and chances are that subsidy will be the maximum amount which is projected to be around 80% of the cost of a family policy. That’s a “gift” of around 8k right now, and it will grow to even more as time goes on (it’s indexed to the cost of the plans and incomes, so it does not require law changes to be updated).

  • dpmaine

    Friom what I have seen there aren’t going to be any real straight up exemptions for unions. They almost always already provide insurance that meets the standard.

    The biggest gift to unions is that other shops that don’t provide insurance will be forced to come to parity with the union shops that do provide insurance. That makes everyone else as uncompetitve as unions in a lot of ways.

  • jaykali

    I have used it as well. I know that the govt sponsored one will work with Medicare / subsidies, etc..

    It seems like the Feds could have built one system that the states could use. I know states would plug in their own health insurers but I don’t see why the Feds would make 50 states create 50 different exchange websites when the half the supposed point was to mandate certain coverage to make health plans more apples to apples.

    So as usual I don’t know what the Feds are doing but I am sure there will be a lot of delays along the way. I am very curious as to what the subsidies will be and if they will be enough to get low wage workers to buy insurance. I think e Feds have underestimated how many ppl will not buy insurance at any price bc they don’t think they need it. I suppose the individual mandate will force them to…this is going to get interesting.

  • davesinsanantonio

    Actually, it will make unions less competitive in gaining members. If you can get the same benefits as union members without paying union dues, why join the union???

  • The_Gadfly

    Your points in order:

    1. Store managers are on salary, which is a sunk cost. If it takes the manager longer to make the schedule, tough. In tight times you do what is necessary to stay profitable and open. The bottom line is unforgiving.

    2. True they’re going to be looking to work more than 1 job. That’s their problem not yours. You make the schedule, if they don’t show up, or make an appropriate shift swap with another employee and report it back to you, they get fired for cause. Since it’s cause, you don’t have to deal with unemployment insurance going up beyond what politicians are already jacking it. In tight times you do what is necessary to stay profitable and open. The bottom line is unforgiving.

    3. I’ve never met anyone who likes running a 24/7 store. The vast majority of the market is NOT 24/7. Insufficient demand, too much cost, too many headaches. Remember, we’re talking retail/fast food here, not hospital or police services. Being closed 6-8 hours works in at least 90% of the market now. It can cover more if it needs to. In tight times you do what is necessary to stay profitable and open, even if that means changing the hours on what was a 24/7 shop. The bottom line is unforgiving.

  • vietnamvet1971

    Good move, How can we or the Governor of any State Believe any thing The, Big, Bad, Behemoth, Bloated, Bankrupt Gimme-mint says, of course they want us to just follow their Stupid Polices and ask NO questions. I do not Trust our Gimme-mint.

  • whitetop

    How much does each member pay for their own insurance and how much is picked up by the taxpayers? And as greyeagle points out; they exempted themselves from Obamacare.

  • celador2

    So HHS has a small but willing group of states who are willing totak on an HIX. Let them be beta test sites and models. If party switcher Chares Crist defeats Gv Rick Scott in 2014 the exchanges may go foward and we will see a health care disaster like Florida has never seen.

    If Crist balks at the exchanges then he may be not such a loyal Ob supporter as he claims.

  • conservative_dan

    Since most states have refused to participate in 0care and a number of Democrat Senators have expressed opposition to the medical device tax within it, I think it would be a great time to have the House re-re-re-introduce a full 0care repeal. They should make the statement as publicly and loudly as possible and base it on the two points I mentioned above. Make the Dems continue to own this colossal piece of crap.