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Problems With State Health Insurance Exchanges

Posted Dec 17 2012 11:19am

Stanley Feld M.D.,FACP,MACE

December 15th was the deadline for states to sign up to implement state health insurance exchanges.

President Obama was hoping all 50 states would agree to set up and implement health insurance exchanges.

Health insurance exchanges might be able to dis-intermediate the healthcare insurance industry. They might also cause the insurance industry to leave the healthcare business.  

If that happens President Obama would not have anyone to provide administrative services for Medicare and Medicaid.

Why would President Obama be interested in expanding a failed entitlement program such as Medicaid? Medicaid is bankrupting the healthcare system.  States would  go deeper in debt if they try to implement health insurance exchanges. In order to survive states would have to increase state taxes.

Businesses and people are leaving California in droves because of the real effective tax rate will be over 60% of gross income on January 1, 2013.  

Governors realize their state can have a competitive advantage over others in  attracting corporations to move to their state if they balance their budget. They are trying to avoid this federal government disaster. 

Over 60% of the population is opposed to Obamacare.  

States refusing to set up state health insurance exchanges are reflecting public opinion.

President Obama’s goal should be to improve entitlement programs such as Medicare and Medicaid so that the programs would save money and improve the healthcare system.

 “Even President Obama has recognized Medicaid is broken," says Mike Schrimpf, spokesman for the Republican Governors Association. "For many states, placing more individuals into a broken system would be like adding more passengers to the Titanic. And regardless of whether it's federal dollars or state dollars, taxpayers are still on the hook."

A total of 30 states are leaning toward rejection of the health insurance exchange concept. Only 17 states plus DC have agreed to run a health insurance exchange.

The federal government will have to set up 30 health insurance exchanges. The latest reports are the administration is not prepared to set up run the exchanges.

As of November 19, 2012, seventeen states, NY, MA, RI, NH, DC, KY, DE, W VA, MS. NM, CO, CA. OR, NV, MN, WA, and HI have declared their intention to establish a State-based Exchange (SBE).”

After my recent articles about health insurance exchanges several readers asked why the health insurance exchanges were a bad idea from a state’s point of view.

There are many reasons:

 1. States are under no obligation to create a health insurance exchange that could create a large financial burden to the state and its citizens. A Supreme Court ruling has given states that option.

2.  14 states have enacted either statutes or constitutional amendments (or both) forbidding state employees to participate in an essential exchange function. It made operating Obamacare illegal in the following states; Alabama, Arizona, Georgia, Idaho, Indiana, Kansas, Louisiana, Missouri, Montana, Ohio, Oklahoma, Tennessee, Utah, and Virginia

States passing these amendments was by a state was part of the strategy to reject Obamacare.

 3. State governors estimated that health insurance exchanges would cost the state $10 to $100 million dollars a year. State constitutions prohibit budget  deficits. Health insurance exchanges would necessitate increased taxes.

Increasing taxes has a negative effect when states are trying to lure businesses. i

4. Deadlines have continually been delayed. Concrete rules and regulations have not been published. Uncertainty prevails as if a trap is going to be sprung on the states.

 President Obama has not yet provided the crucial  information  for states to make an intelligent decision about setting up a health insurance exchange. President Obama wants the states to trust him, sign up, and then accept federal regulations.

5. States have been given the option to create health insurance exchanges at a later date. Some state politicians fear the loss of federal funds. Others see the federal funds as a carrot that will cost their state more in the long run.

6. In the preliminary rules the “state-created exchanges” are not controlled by a state-controlled exchange. The exchanges are to be controlled by rules created by the Obama administration.

7.  President Obama has authorized payment to the states for start up costs and expenses for Medicaid Expansion until 2017.

Congress has not authorized these funds. President Obama might not be able to get the funds from congress to fund the states’ health insurance exchanges.

The states’ would be stuck with the bill.

8. State officials responsible for setting up the exchanges believe Obamacare will fail. Many feel it will increase private insurance premiums and deny assess to care.

These state officials do not want to take the blame for this disastrous mess that they have no control over.  

9. President Obama’s ultimate goal is to create a “Public Option” and then have the federal government control all the stakeholders in the healthcare system.  His ultimate goal is to have a single party payer system.

State governors understand that public outcry will stop it. States want to control their own destiny.

10. If the federal government must set up health insurance exchanges because the state refuses, the Obamacare law as written exempts a state’s employers from the employer mandate of $2,000 per employee per year.

The Supreme Court called the mandate a tax but everyone knows it’s a mandate.

11.  If the states avoided the mandate and save $2,000 per state employee it would put the state at a competitive advantage to improve the prospect for job creation. It would protect individual and states rights. It would protect some tenants of religious freedom that Obamacare ignores.

 There is no evidence that Medicaid is cost effective, that medical outcomes are improved or that access to medical care for the poor would improve.

“There is scant reliable evidence that Medicaid improves health outcomes, and  no evidence  that it is a cost-effective way of doing so.” 

In the short term it has been predicted that healthcare insurance premiums for the middle class will increase by 50% and access to medical care will decline.

State health insurance exchanges will result in higher state taxes, fewer jobs, and less protection of religious freedom. States are better off defaulting to a federal exchange.

Neither the states nor the federal government has the money to expand Medicaid.

Theoretically, health insurance exchanges are a good idea. Practically, they are not.

If all states refuse to set up health insurance exchanges and avoid falling into President Obama’s trap Obamacare will be doomed.

 The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

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