Greensburg Daily News, Greensburg, IN

November 5, 2012

The impending disaster of the Obamacare exchanges

Sally C. Pipes
Greensburg Daily News

Greensburg — All eyes are on election day, Nov. 6, but 10 days later may prove to be the true make-or-break moment of President Obama’s political career — regardless of the election result.

Nov. 16 is the deadline for states to submit a blueprint to the federal government for Obamacare’s insurance exchanges — a key component of the new healthcare law.

Already, the exchange system is proving to be an unmitigated disaster.

No one should be surprised by this. Like so much of the president’s gargantuan healthcare entitlement, the exchanges are burdened by a spider’s web of confusing regulations, poor design, and a top-down, command-and-control structure.

These exchanges were conceived as state-based insurance marketplaces. They were intended to reduce costs and increase access by streamlining the process of buying coverage. States would customize their exchanges to meet specific local needs. They could experiment. And individual consumers and small businesses would have an easy avenue to get coverage.

It seemed to be a rare instance of liberal lawmakers taking Justice Louis Brandeis’ advice to use states as “laboratories of democracy.” In practice, however, nothing could be further from the truth.

For starters, each state’s base plan must abide by federal mandates regarding application requirements, income verification, and appeals processes. Regulations released earlier this year by the Department of Health and Human Services state the situation plainly: “The Affordable Care Act does not contemplate divided authority over an Exchange.”

In other words, it’s the fed’s way or the highway. If a state refuses to start up an exchange, the federal government steps in and forcibly establishes one for them.

So much for experimentation.

But it gets worse. Even now, state governments have no idea what standards or rules they will actually have to abide by. With only weeks remaining before the Nov. 16th deadline, the federal government still hasn’t even spelled out the so-called “Essential Health Benefits” — that is, the set of minimum benefits every plan on the exchange has to offer. (Then again, what do you expect from a government that hasn’t even passed a budget in three years?)

As Pennsylvania State Insurance Commissioner Michael Consedine explained before Congress last month, “Continuing without answers to these crucial issues is like driving down a winding road, at night, without any headlights — nothing good will come of it.”

But even if the government had done its job and spelled out the rules, the exchanges would still be a raw deal for the states.

To date, only 15 states plus Washington, D.C. have declared their intention to set up insurance exchanges. The rest are holding back, upset with the costs associated with running them.

States have to bare the expenses of staffing these exchanges and financing development of needed technologies, like website registration systems. Many worry that these costs will deplete funds for more immediate needs, like education and transportation.

It’s for such reasons that Florida and Louisiana have opted not to set up their own exchanges.

Back in Sept. 2010, financially strapped California was the first state to sign legislation creating an exchange. California’s pocketbook was already hurting then and things have only gotten worse since. Local cities like Stockton and San Bernardino have declared bankruptcy.

Now the Golden State will have to shell out for an exchange expected to cost over $2 billion a year. With little progress being made since CA accepted the first funds from the feds to set up an exchange, Peter Lee, who is in charge of establishing the exchange, has hired the consulting firm Accenture to help build it.

California Health and Human Services secretary Diana Dooley has even criticized the essential health benefits requirement. These mandates drive up the price of plans. As a result, some insurance companies may decide not to participate in the exchanges at all. And, as Dooley recently told the New York Times, many of the required benefits “go beyond what I would call essential.”

Making matters worse, the deadline for compliance comes in the throes of a presidential election, ensuring that the issue will be fraught with political baggage. Some conservatives, like New Jersey Governor Chris Christie and Nebraska Governor Dave Heineman, have decided to wait until after the election to make any major decisions about the exchanges.

Like Obamacare itself, the exchange system is plagued by incompetent management, burdensome regulations, and inept political calculations. Even if the president manages to eke out a victory on election day, November could still prove his undoing.