Obamacare Insurance Exchanges: States Have Options

Nina Owcharenko / Edmund Haislmaier /

Governor John Kasich (R) is expected to opt not to set up a state Obamacare exchange. This is the right decision for Ohio. The President’s health care law is unworkable and unsustainable. Rejecting the health insurance exchanges, and equally as important, the Medicaid expansion, are two opportunities states have to push back on this law and instead push forward on a better health reform agenda for Ohio.

These exchanges are used in the law to funnel subsidies to government-controlled health plans. Some proponents of the law will undoubtedly criticize the Governor’s decision. But, there are more practical and sound reasons why opting not to adopt a state exchange is best for the states.

First, under the exchange regulations promulgated by the Secretary of Health and Human Services (HHS), states would gain no meaningful flexibility or advantage by operating their own exchanges, relative to a federally facilitated exchange. They would simply be acting as vendors to HHS.

Second, states still regulate insurers (including those participating in exchanges) in all matters not otherwise preempted by federal law, regardless of who operates the exchange. States can also regulate exchange “navigators” through state professional licensure statutes, to ensure equal standards/level playing field with other insurance producers, again, regardless of who operates the exchange.

Third, electing to operate the exchange means that the state government is voluntarily taking responsibility for the results, along with the obligation to secure the necessary operational funding. While the Obama Administration is encouraging states to commit to establishing a state exchange, there are numerous, important details still unknown. Every day that goes by with no roll-out of these vital pieces by the Obama Administration further increases the probability that the Administration is not ready and will fail when the exchanges are expected to open in October.

Fourth, a state that elects to let the federal government set up the exchange can—if it doesn’t like the results—set up a state exchange to replace the initial federal exchange later. There is no rush to commit.

The next big decision for Governor Kasich will be whether he also rejects the Medicaid expansion. Here, too, there will be many who will try and argue why Medicaid expansion is a good idea. But the promises of no cost, more control, and helping those without health insurance fall flat. The Medicaid expansion will bring long-term costs to the states, offer no new flexibility to the existing Medicaid program, and create greater dependence on government-run health care rather than less.

Health care reform is important, but recognizing a failing solution is even more important. Governor Kasich deserves tremendous credit for recognizing the shortfalls of the Obamacare exchanges and, hopefully, he will come to the same conclusion with the Medicaid expansion. Likewise, instead of acquiescing to a flawed law, states like Ohio can lead the way to the right health care solution.

This blog originally appeared at The Buckeye Institute.