Governor Corbett's decision yesterday to refuse to implement a state-based health care exchange under the Affordable Care Act (which means Pennsylvania will revert to a federally-run exchange), was the best move for Pennsylvania taxpayers and consumers. Here are a few reasons why this decision was well reasoned:
- A state-run exchange offers only the illusion of state control. State regulations cannot conflict or override regulations laid out by the U.S. Department of Health and Human Services (HHS). Basic rules for regulating the exchange, such as what constitutes an essential benefit plan, are yet to be finalized by HHS. States have asked for more clarification, and only received a cursory FAQ from the federal government. Most importantly, HHS can change regulations at any time, effectively having complete control over state governments in regards to health insurance regulations.
- Costs would be borne by state taxpayers. Beginning in 2015, exchanges must become self-sustaining. States will shift the administrative costs to consumers through a new user fee or higher premiums. Some states have estimated this cost to be between $30 and $50 million per year. To fund the federal exchange, HHS will impose a 3.5 percent fee (tax) on all insurance plans sold on the exchange-a charge that will certainly make insurance that much more costly.
- Exchanges don't create more robust competition. The idea behind exchanges was to give consumers an easier way to shop for coverage and get more information about insurance plans. But these options already exist through websites like www.ehealthinsurance.com or www.getinsured.com. In fact, a KPMG survey of Pennsylvania consumers and businesses found they don't trust government websites for health care info, but prefer privately sponsored sites to get health coverage information. Rather, the mandates and regulations tied to the federally-approved exchanges means less competition, as all health care plans will be pretty much the same.
- Exchanges won't lower the cost of insurance. While the law was intended to make health care more "affordable," the real-world evidence suggests that isn't happening. Even the most ardent Obamacare backers recognize that "premium growth, although slower than in years past, continues to outpace inflation and wage growth."
- Massachusetts was the first state to implement a government-run exchange, the Healthcare Connector. Today, Massachusetts residents still spend more on health care coverage than any other state.
- Instead, states should offer principled health care reform to make insurance less costly, such as reducing insurance mandates and allowing shopping across state lines. These reforms will also make it politically difficult for HHS to enforce more expensive basic plans.