Politics & Policy

Don’t Make an Exchange

The Affordable Care Act (ACA) was a milestone in many ways, marking previously uncharted territory in federal arrogance and overreach. As health-insurance policy goes, it promises to prove catastrophic, but its constitutional implications are more worrisome still in that it is among the most insidious attempts yet to reduce the states to mere administrative subdivisions of the federal government. Led by Oklahoma, many states have pushed back by declining to comply with the law’s demand that states create health-insurance exchanges. We encourage those states to hold their ground, and we hope that others will join them.

Backers of Obamacare want state governments to create exchanges. They note that the federal government will step in and create the exchanges itself if states refuse to comply. Some state leaders, believing resistance to the law to be futile and seeking what control they can exercise over health policy in their states, are tempted to give in.

But those leaders are in error. For one thing, ACA regulations are so byzantine and intrusive that they will prevent the states from exerting any meaningful control over the structure or operation of the exchanges. They will be state exchanges in name only. Even the best-intentioned state leaders seeking to ensure that the exchanges are cost-effective and that they serve their customers in a responsible and conscientious fashion will have little or no practical authority to do so. They certainly will have no power to mitigate the law’s trampling of religious liberties and individual consciences. Second, Congress has to its credit declined to appropriate any money for the federal government to create these exchanges, leaving the Obama administration without sufficient resources to implement its threat to create exchanges itself in recalcitrant states.

A critical related question — which will almost certainly be decided in court — is whether the federal government has the legal authority to offer Obamacare subsidies to customers of exchanges created by the federal government rather than by the states. This is important because those exchanges simply will not be economically viable without those deficit-exploding subsidies, which will add the better part of a trillion dollars to the national debt over the next decade, and perhaps more. The law as written authorizes the subsidies for customers of state-created exchanges but offers no similar authorization for the federally created exchanges.

Liberal legal analysts have argued that the federal government does have the power to offer those subsidies, and protest that Obamacare opponents are construing the law too narrowly. But the fact is that there is no such authority under the law, and there is a good case that the omission was intentional. Despite President Obama’s promises to the contrary, the law seems certain to raise insurance premiums, lower quality for many consumers, and otherwise interfere with the delivery of health care. The state-level exchanges are in the bill to provide Washington Democrats with a scapegoat for when things go wrong, and the subsidies are likely there to ensure that these exchanges will be set up. And because the states will have to bear the operating costs of the exchanges they create — which may run as much as $100 million a year — they are one more way for Obamacare to increase taxes on Americans without the Obama administration or its congressional enablers taking responsibility for it.

Even more worrisome, the exchanges will be used to implement the least popular aspects of Obamacare: the individual mandate and the employer mandate, and the taxes associated with them. And so here again we find the administration pushing its dirty work off on the states. Residents of states that create exchanges are subject to the $2,000-per-worker annual tax for noncompliance with the individual mandate. Refusing to set up the exchanges, on the other hand, could save millions of Americans billions of dollars in Obamacare taxes.

It is unclear what exactly the outcome will be when Obamacare’s avalanche of regulations lands upon the health-care industry. We believe that the consequences are likely to be unpleasant and unpopular, and that those state leaders who enable them are likely to pay a high political price for doing so. If imposing heavy new taxes and cumbrous new regulations upon their states’ residents is not enough, political self-interest alone should counsel state leaders against putting their imprimatur upon the exchanges.

Oklahoma is suing to secure its sovereignty against Obamacare’s intrusions, and 14 states have passed laws (and in some cases constitutional amendments) forbidding state workers to enable the administration in implementing the mandate. The states are under no legal or constitutional obligation to establish the exchanges, and if enough of them refuse to do so, then Washington will have no choice but to revisit the deeply unpopular law, providing the country with an opportunity to excise some of Obamacare’s most obnoxious elements. And though full repeal remains an unlikely possibility with Democrats controlling the Senate and the White House, the worst aspects of the law can be delayed or stopped altogether until such a time as pulling up Obamacare by the roots becomes a real political possibility. Obamacare is a threat to American health care, to be sure, but it is also a threat to the character of American government — injuries to which are not easily healed.


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