NCPA - National Center for Policy Analysis

Should Your State Establish an Obamacare Health Insurance Exchange?

October 29, 2010

In the pre-Obamacare world, exchanges were suggested as a way to get around the major government failure in American health care: Congress' grant of monopoly control of our pretax health dollars to our employers, says John R. Graham, director of health care studies at the Pacific Research Institute and a senior fellow with the National Center for Policy Analysis.

Official sources estimate that about half a trillion federal dollars will flow into Obamacare exchanges between 2014 and 2019, and these likely underestimate the true costs of the subsidies.

  • The Congressional Budget Office estimates that 24 million people will enter the exchanges in 2019, of which only 3 million will come from the 162 million who would have enjoyed employer-based benefits under the status quo ante.
  • The actual number will be far greater -- independent analysis concludes that anyone who earns less than $80,000 annually will be dumped into an exchange.

Those states establishing exchanges will soon find that they are very expensive to operate, says Graham.

  • The Utah Health Exchange only costs about half a million dollars annually, but it has so far just been a pilot program with a dozen businesses participating.
  • Massachusetts' Commonwealth Connector spent more than $26.6 million on vendors and contractors in 2009, and $3.4 million on employee compensation; the total comprises fully 3.5 percent of the money that businesses and enrollees paid into the exchange.

States establishing Obamacare exchanges are making a one way, lose-lose bet.  If Obamacare persists, exchanges will become bloated administrative nightmares.  If Obamacare is defeated, states will have wasted time and energy that should have been directed towards that effort.

Source: John R. Graham, "Should Your State Establish an Obamacare Health Insurance Exchange?" October 25, 2010.


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