Obamacare faces threat at the state level

Last month, I noted that even though Obamacare survived Supreme Court review and the presidential election, it is not a done deal. Why? Because the law is heavily dependent on state implementation, and some states might not do the federal government’s bidding. Specifically, they might not set up state health-insurance exchanges, which are a central component of Obamacare.

Today comes word that, on the eve of a federal deadline for states to say whether they will run their own exchanges, only 15 states have told the federal government they plan to operate health insurance exchanges. The number reportedly could rise to about 18 states plus the District of Columbia, but this would still leave the federal government with the task of creating online marketplaces for considerably more than half of the country.

That task is an administrative nightmare made worse by the fact that Congress didn’t allocate money for administering federal exchanges. Moreover, it can be argued that the law as written seems to prohibit federally run exchanges from providing subsidies to individuals. Such a prohibition would prevent federal exchanges from functioning.

Why states are so reluctant to set up exhanges? Wesley Smith explains :

State officials are very smart not to set up their own exchanges since any costs beyond what the Feds offer to help pay is on their taxpayers’ dimes. Moreover, since the Obama Administration has centralized control of setting minimum coverage standards–see the Free Birth Control Rule–the flexibility of states to regulate in this area is severely compromised. I mean, why take the potential blame if when things go badly you don’t have a free regulatory hand?

What are the prospects for obtaining more state cooperation with Obamacare? Smith continues:

If Obamacarians want more local cooperation, it seems to me that they will have to give up their ultimate control over state insurance markets. But Obamacare is a gargantuan power grab, so don’t look for that to happen anytime soon.

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