State legislators and governors will face many challenges implementing the provisions of Obamacare. In a new Heritage Foundation study, Ed Haislmaier and I analyze the components of Obamacare that detrimentally affect states and make recommendations for how states should respond to the new law.
Of the many impacts on states that we analyze, there are three key ones:
1) The Massive Medicaid Expansion
Over half of the newly insured will gain coverage through an expansion of state Medicaid programs. Medicaid expansion presents numerous problems for the states: additional financial obligations and taxes, issues of access for the increased demand on the state health care system, the creation of a new “doc fix” for Medicaid, reduced Disproportionate Share Hospital payments, and maintenance-of-effort requirements that limit state flexibility.
2) The Federal Usurpation of State Authority
States will be forced to contend with the usurpation of their longstanding authority in regulating private insurance. The Secretary of Health and Human Services is given enormous power to regulate health insurance to his or her specifications.
3) The Disruption of Health Insurance Markets
Obamacare—with its numerous coverage mandates, a prohibition on pre-existing condition exclusions and on varying premiums by health status, and limits on the age-rating of premiums—risks an adverse selection death spiral. In the paper we state, “The new federal insurance regulations, particularly the provisions setting new, uniform federal benefit requirements, will reduce coverage options for individuals and employers and drive up health insurance premiums. They are also likely to result in greater concentration in health insurance markets, leaving only a few large insurers operating as public utilities with a regulated low rate of return selling undifferentiated products to customers with no other options.”
State lawmakers should act quickly to protect their constituents from these and other harmful impacts of Obamacare. We argue that “states are not mere agents of federal authority. They are not powerless. There is absolutely nothing that requires them to assist in implementing this misguided legislation. Rather, they should take every opportunity to assert their rightful authority, resist, within the confines of the law and the Constitution, any inappropriate or unconstitutional exercise of Washington’s power and aggressively advance their own, better solutions.”
To read more on Obamacare’s impact on states and our recommendations for how states can best cope with the new law, please read our paper: http://www.heritage.org/research/reports/2010/07/obamacare-impact-on-states