NCPA - National Center for Policy Analysis

The Truth about Health Insurance Exchanges: Why Lawmakers Shouldn't Rush Implementation

March 13, 2012

The Affordable Care Act (ACA) permits states to establish health insurance exchanges.  These exchanges will operate as new bureaucracies to oversee the purchase of government-approved health insur­ance.  States electing to create these exchanges must comply with federal rules that will dictate virtually all aspects of the exchanges' opera­tions, says Jonathan Ingram, a health care policy analyst with the Illinois Policy Institute.

If a state chooses to establish an exchange, it will bear the full cost of running it.  While a number of people are urging states to immediately create an exchange, the reasons are based on myths, not facts.  In this report, Ingram responds to those myths.

Myth: If a state does not build an ex­change, the federal government will build its own and op­erate it here in Illinois.

  • Fact: Nobody knows what will happen if Illi­nois refuses to implement an exchange.
  • Fact: While Congress supplied funding for the states to set up health insurance exchanges -- though not to run them -- it did not provide the federal De­partment of Health and Human Services with the resources necessary to establish a federal ex­change in every state that refuses.

Myth: An exchange administered by a state will en­sure the state has greater flexibility than if the federal government administers the exchange.

  • Fact: Although the state exchange would be run by state officials, the state would have no more freedom or flexibility than under a federally-im­posed exchange.
  • Fact: Federal rules will dictate virtu­ally all aspects of the exchange's operation.

Myth: The Supreme Court case only concerns the in­dividual mandate and the exchanges will move forward regardless of the Court's ruling.

  • Fact: The Supreme Court is deciding several is­sues concerning the ACA, including wheth­er to strike down the entire law.
  • Fact: If the Court strikes down the entirety of the law, the money and effort expended to create the exchange will have been wasted.
  • Fact: Even if the Court upholds the law -- or part of the law -- legal challenges to the exchange provisions and their related federal rules are already being prepared.

Source: Jonathan Ingram, "The Truth about ObamaCare Exchanges: Why Lawmakers Shouldn't Rush Implementation," Illinois Policy Institute, February 28, 2012.

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