Georgia Wise to Halt Health Insurance Exchange

By Kelly McCutchen and Christie Herrera

Kelly McCutchen, President, Georgia Public Policy Foundation

In a few weeks, the U.S. Supreme Court will hear oral arguments from Georgia and 25 other states who are challenging the constitutionality of President Obama’s 2010 health care law, the Patient Protection and Affordable Care Act.

Meanwhile, another battle has been quietly taking place, as Georgia and other plaintiff states decide whether they should implement one of the law’s key components, a health insurance exchange.

Earlier this year, Georgia Governor Nathan Deal and officials in the Legislature wisely agreed to halt implementation of the exchange – new government bureaucracies to regulate and subsidize health insurance – until the nation’s highest court rules in June. Last December, the governor’s advisory committee had recommended the establishment of an exchange for small businesses operated privately or by a limited quasi-governmental authority.

Exchange supporters claim that it will be extremely difficult to be compliant with the health law if Georgia does not start now. But it would be irresponsible for Georgia to commit state resources towards implementing a law whose fate is uncertain. In fact, just 15 states have committed to an exchange since the federal health law was enacted two years ago.

For state officials, there’s no upside to spending Georgia’s time and money enforcing all of the federal rules associated with a state-run exchange. Every detail of a state exchange, from implementation to operation, must be approved by federal bureaucrats. And when things go wrong, Georgia lawmakers – not officials in Washington – will take the blame.

Some also argue that Georgia should set up an exchange now, or the federal government will do it for Georgia. Obviously, federal threats shouldn’t determine whether Georgia voluntarily implements a law it is challenging in court.

Like the rest of the hastily written federal health care law, there are serious impediments to setting up a federal exchange. Technically, the law didn’t provide Washington any money to set up a federal exchange. Nor does it offer subsidies to people buying insurance in a federal exchange.

And while the federal Department of Health and Human Services has granted nearly $1 billion to state exchanges, it has spent a mere $150 million on a federal exchange tasked with coordinating the eligibility, subsidies, premiums and benefits for the tens of millions of people who will be required to purchase health insurance under the mandate.

On top of the uncertainty surrounding the Supreme Court decision, technical errors in the law and the federal government’s capacity to set up its own exchange, nobody knows exactly how much an exchange will cost Georgia taxpayers or who will pay for it. The federal government provides grants to states to get their exchanges up and running, but that money will run out in 2014.

From then on, states will be on the hook for ongoing operational costs. Some states that have passed exchange legislation are considering a bevy of new taxes to pay for it, including premium taxes, “sin” taxes, provider taxes and “user fees” for people buying coverage within the exchange. Others are considering spending cuts to state priorities like education, transportation or law enforcement. In tough budgetary times, none of these options are appropriate for Georgia.

In a few short weeks, the eyes of the nation will be on Georgia and its fellow plaintiffs as the future of federal health care law plays out in the Supreme Court. Georgia should not willingly implement bureaucratic and costly state health insurance exchanges that are ultimately controlled by the federal government. Kudos to the governor and Legislature for resisting a rush to action on this critical issue.

(Kelly McCutchen is President of the Georgia Public Policy Foundation.  Christie Herrera is director of the Health and Human Services Task Force at the American Legislative Exchange Council.)

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