Key states on the front line of stopping ObamaCare
by Diane Cohen, General Counsel Introduction In the wake of the Supreme Court’s decision in NFIB v. Sebelius last June, and with the prospects for repeal of the Patient Protection and Affordable Care Acti dashed by the 2012 elections, key states – including Florida, Idaho, Indiana, Iowa, New Jersey, Pennsylvania, Tennessee, Utah and Virginia - are now on the frontline of the battle to stop ObamaCare. These states retain a powerful tool to block the enforcement of critical provisions of the law by saying yes to individual liberty and federalism and no to establishing a state ObamaCare insurance exchange. For those who oppose the federal government’s takeover of health care the decision on state exchanges should be easy and it should be “no.”ii Exchanges will be key to enforcing the individual mandate, including turning over names and Social Security numbers of those who do not comply with the mandate to the Internal Revenue Service. They also will be charged with assessing taxes and penalties on employers. But misinformation by the law’s proponents and some in the insurance industry, which stands to gain billions of dollars from enforcement of the lawiii, has muddied the issue. Indeed, the prevailing myth being perpetuated is that states can preserve state control by establishing a state exchange. But as shown below, this myth is refuted by the express language of PPACA itself, which states that a state exchange may not establish rules that conflict with the statute or regulations promulgated under it. Not only does the law put the federal government in control of the health insurance companies that may participate in the exchange, the plans that may be offered and even what doctors and providers can participate in exchange-offered plans, but these mandates will also remain while federal funds for state exchanges end in 2014. Therefore, states both will be under the federal government’s thumb and responsible for tens of millions of dollars in annual operating costs for
this new bureaucracy. This heavy financial burden may just explain why after nearly three years since PPACA’s enactment, only 17 states, plus the District of Columbia, are moving forward with establishing an exchange, with 20 states and counting saying no.iv Additionally, while state exchange supporters euphemistically refer to exchanges as marketplaces, or the “Travelocity” of insurance, they are in fact government-sanctioned, invitation-only clubs where only government-approved insurance companies can sell government-approved insurance. As such, exchanges only will truly benefit the insurance companies that get invitations to join and will thus reap millions from participants who are required to purchase their products, and bureaucrats who will get jobs. States that say “no” will not only save tens of millions of dollars every year, they will also effectively block the federal government’s ability to assess taxes on employers in their states while standing up for freedom of choice and individual liberty. The following are select provisions of the law that show the extent of federal control over the exchanges. Likewise, they show that any state that establishes an exchange will be enforcing the individual mandate and infringing on their citizens’ rights to choose the health care and insurance that best suits their needs. 1. Flexibility and control are just a myth: The federal government controls exchanges even if they are state-established. Despite a provision in the law titled “State Flexibility in Operation and Enforcement of Exchanges and Related Requirements,” the law in fact confers no flexibility to states, only more authority to the Health and Human Services Secretary over state exchanges. In fact, while that provision allows states to adopt exchange laws and regulations, they are only allowed to adopt such laws and regulations that “the Secretary determines implements the standards within the State.”v The section also states that a state exchange “may not establish rules that conflict with or prevent the application of regulations promulgated by the Secretary [of Health and Human Services (“HHS”)].”vi 2. The federal government controls the doctors and other providers who are allowed to participate in an exchange-offered insurance plan. PPACA mandates that only providers that “implement such mechanisms to improve health care quality as the Secretary may by regulation require” may participate in a “qualified plan” offered on the exchange.vii 3. The federal government prescribes the benefits that must be included in a plan and gives authority to the HHS Secretary to prescribe more.viii 4. State exchanges are state-funded and federally regulated. PPACA prohibits federal funds for state exchanges after Dec. 31, 2014, and requires that state exchanges ensure that they are self-sustaining by Jan. 1, 2015.ix 5. State exchanges will cost states tens of millions of dollars in annual operating costs.x States have no reason to strain already tapped budgets to pay for an exchange. In fact, it would be irresponsible for states to take on this needless burden.
6. State exchanges are required to turn over to the federal government the names of individuals who do not comply with the individual mandate. PPACA requires state exchanges to determine whether an individual is exempt from the mandate, certify those who are exempt, and send the Secretary of the Treasury a list of individuals who are certified exempt. State exchanges must also send the federal government a list of individuals who change employers and cease coverage under a “qualified” insurance plan during a plan year, by name and Social Security number.xi 7. States that refuse to create a PPACA exchange protect employers from taxes and penalties. Pursuant to the law, these taxes only can be assessed in states that set up an exchange.xii These taxes range from $2,000 to $3,000 per employee for employers, with 50 or more full-time employees, who fail to provide insurance or provide insurance that the federal government does not find acceptable.xiii 8. Government exchanges restrict the freedom to choose the health insurance that best suits one’s needs. Those required to purchase insurance through an exchange, including those receiving government assistance, should not be forced into a government-run bureaucracy where their choices are controlled by federal bureaucrats. Instead, individuals, regardless of income level, should be given the opportunity to purchase the insurance policies that best suit their needs. 9. Even the federal government acknowledges that a state-established exchange has an adverse impact on federalism principles “due to the direct effects on the distribution of powers and responsibilities among the State and Federal governments.” In fact, according to HHS, the only reason the impact is “substantially mitigated” is because the law does not require states to establish an exchange. This is why a state that chooses to establish an exchange is not only choosing to assist in the federal government’s takeover of health care in their state, but it also surrenders its sovereignty and the individual liberty rights of its citizens in the process.xiv For states with a Health Care Freedom Act, including Idaho, Indiana, Utah and Virginia, establishing a state exchange would violate state law that protects individuals’ rights to purchase (or not) the insurance and medical care that best meets their needs. 10. The federal government should be held accountable for enforcement of a law that a majority of Americans oppose and Congress did not fund. Conclusion All states get by establishing exchanges are federal mandates and tens of millions of dollars in bills every year. What states give away, however, will be much greater – state sovereignty and the liberty of their citizens. We are at a critical time in this nation. Governors and legislators in key states are uniquely situated to stand for individual freedom and against government-dictated health insurance. The choice is theirs. What they do decide will affect not only the citizens of their states but also the fate of the entire nation.
Referred to herein as “PPACA” or “ObamaCare.”
See also, “Ten Reasons Why Arizona Must Reject Health Insurance Exchanges,” Diane Cohen, http://goldwaterinstitute.org/sites/default/files/11-411%20%20Health%20exchange%20policy%20memo%20%282%29.pdf. iii http://reason.com/blog/2012/10/08/obama-claims-repealing-obamacare-would-b.; http://washingtonexaminer.com/obamacare-aarps-get-rich-quick-scheme/article/2508703; see also “Insurers Face $1 Trillion Revenue at Stake in Health Law,” Bloomberg, May 14, 2012, http://www.bloomberg.com/news/2012-05-14/insurers-face-1-trillion-revenue-at-stake-in-healthlaw.html. iv See “State Decisions For Creating Health Insurance Exchanges in 2014,” Kaiser Family Foundation. http://statehealthfacts.kff.org/comparemaptable.jsp?ind=962&cat=17 v § 18041(a), (b)(2). vi 42 U.S.C. § 18031(k). vii § 18031(h)(1)(B). viii § 18022(a), (b). ix § 18031(a)(4)(B) and (d)(5)(A). x See e.g., Wakely Consulting Group, “Illinois exchange strategic and operational needs assessment: Final report,” Illinois Health Benefits Exchange Legislative Study Committee (2011), http://www.ilga.gov/commission/cgfa2006/Resource.aspx?id=1227; “Minnesota Facing Bigger Bill For State's Health Insurance Exchange,” http://www.kaiserhealthnews.org/Stories/2012/November/26/minnesota-health-insuranceexchange.aspx; “Ohio says no to an Obamacare health insurance exchange,” http://www.governor.ohio.gov/Exchange.aspx; “Why Obamacare is still no sure thing,” Wall Street Journal, James Capretta and Yuval Levin, Nov. 13, 2012, http://online.wsj.com/article/SB10001424127887324735104578122741540428344.html. xi § 18031(d)(4)(H), (I). xii Jonathan H. Adler, Michael F. Cannon, “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA,” July 16, 2012, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2106789. xiii http://www.obamacarewatch.org/primer/employer-mandate. xiv 76 Fed. Reg. 41910-11.
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