No Obamacare Exchanges

Apr 25, 2012
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Obamacare had a bad couple of days before the Supreme Court - so bad that
President Obama made some ill-considered comments about the Court from which
he still hasn't totally backpedaled. Though the oral arguments over the
individual mandate and severability were encouraging, we cannot count on the
Supremes to kill Obamacare. Opponents must keep fighting it on all fronts.

The most important front right now is to ensure that states do not create
the health-insurance exchanges Obamacare needs in order to operate. Refusing
to create exchanges is the most powerful thing states can do to take
Obamacare down. Think of it as an insurance policy in case the Supreme Court

Exchanges are the new government bureaucracies through which millions of
Americans will be compelled to purchase Obamacare's overpriced and
overregulated health insurance. Through these bureaucracies, insurance
companies will receive hundreds of billions of dollars in taxpayer
subsidies. Without these bureaucracies, Obamacare cannot work.

Here are just a few reasons why states should refuse to create them.

Jobs. Refusing to create an exchange will block Obamacare from imposing a
tax on employers whose health benefits do not meet the federal government's
definition of "essential" coverage. That tax can run as high as $3,000 per
employee. A state that refuses to create an exchange will spare its
employers from that tax, and will therefore enable them to create more jobs.

Religious freedom. In blocking that employer tax, state officials would
likewise block Obamacare's effort to force religious employers to provide
coverage for services they find immoral - like contraception, pharmaceutical
abortions, and sterilization.

The federal debt. Refusing to create exchanges would also reduce the federal
debt, because it would prevent the Obama administration from doling out
billions of dollars in subsidies to private insurance companies.

The U.S. Constitution. The Obama administration has indicated that it might
try to tax employers and hand out those subsidies anyway - even in states
that don't create an exchange, and even though neither Obamacare nor any
other federal law gives it the power to do so. If that happens, the fact
that a state has refused to create an exchange would give every large
employer in the state - including the state government itself - the ability
to go to court to block the administration's attempt to usurp Congress's
legislative powers.

A lower state tax burden. States that opt to create an exchange can expect
to pay anywhere from $10 million to $100 million per year to run it. But if
states refuse, Obamacare says the federal government must pay to create one.
Why should states pay for something that the federal government is giving

Bye-bye, Obamacare. That is, if the feds can create an exchange at all. The
Obama administration has admitted it doesn't have the money - and good luck
getting any such funding through the GOP-controlled House. Moreover, without
state-run exchanges, the feds can't subsidize private insurance companies.
That by itself could cause Obamacare to collapse.

Unfortunately, ever since Obamacare became law, lobbyists for the insurance
companies and others who would financially benefit from it have been wooing
state officials with the false promise that a state-run exchange would
preserve state control over health care. If the Supreme Court fails to
strike down the entire law, they'll say, "Aw, shucks. Now you have to create
an exchange."

Nonsense. Obamacare does not and cannot mandate that states create
exchanges. Moreover, state-run exchanges do not preserve local control. They
will do Washington's bidding, or else they will be commandeered or swept

Even if we assume the Obama administration figures out a way to impose a
federal exchange on states, are there any atrocities a federal exchange
might inflict that federal regulations could not require state-run exchanges
to inflict? Of course not.

That's why every conservative and free-market group, including the Heritage
Foundation and the American Legislative Exchange Council, has advised states
to refuse to create an exchange and to send all related grants back to
Washington. Florida, Louisiana, Oklahoma, Kansas, and Wisconsin have already
done so.

If the Court strikes Obamacare down, state officials who refused to create
an exchange will look prescient. If not, they will be positioned to drive a
stake through its heart.

- Michael F. Cannon is director of health-policy studies at the Cato
Institute and coauthor of Healthy Competition: What's Holding Back Health
Care and How to Free It.
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