State Health Care Exchange: A Dangerous Contingency Plan

A week ago Governor Wolf announced his plan to create a state-based health care exchange if the U.S. Supreme Court nixes taxpayer subsidies to insurance companies through the federal exchange.

Creating a state exchange would harm Pennsylvanians in several ways. A state exchange could cost state taxpayers millions, discourage real health care reform and expose Pennsylvanians to additional tax penalties. Here are five reasons lawmakers should object to the governor’s dangerous contingency plan.

1. Creating a state exchange—or even a hybrid exchange—would be costly. Annual operating budgets for state exchanges, according to The Washington Post, are $28 to $32 million, not including start-up costs which the federal government may not provide.

2. State exchanges have a high rate of failure. Nearly half of the state-exchanges are struggling to remain self-sufficient. Although Governor Wolf is “pretty confident” creating a PA exchange will succeed, no amount of confidence can compare to the reality that many state exchanges have been outright disasters. For example, the state of Oregon received $303 million to establish a state-based exchange, but failed to enroll a single person online. Massachusetts temporarily enrolled exchange applicants in Medicaid when it’s state-based exchange failed—costing the state $10 million per month.

3. We need meaningful health care reform. If the Supreme Court strikes down insurance subsidies provided through, Congress will have a golden opportunity to change the ACA and eliminate many of the rules and regulations that have increased the cost of insurance and, by extension, the need for subsidies.

4. No federal subsidies also means no penalties. Without a state exchange, the IRS would no longer be able to impose penalties on Pennsylvania employers of that don’t offer “qualified” and “affordable” coverage.

5. A state-based exchange provides little state control. The reality is the federal government will retain full control over key insurance regulation decisions that were previously under the purview of the Insurance Commissioner and legislature. For instance, insurance plans will still be required to meet federally-set minimum essential benefits and abide by community rating and guaranteed issue regulations.

Instead of a state exchange, lawmakers can pursue a more reasonable contingency plan. They can shield Pennsylvanians from the individual and employer mandate taxes through the Health Care Freedom Act and create cost-effective alternative insurance plans by allowing insurance companies to offer plans that do not meet the essential benefits package requirements of the Affordable Care Act.