New York State to Create Health Insurance Exchange

New York Gov. Andrew Cuomo has signed an executive order to set up a health insurance exchange in his state. The exchanges are a key part of the 2010 federal health care overhaul: 

Mr. Cuomo, a Democrat who has generally avoided national politics even as he is often mentioned as a potential candidate for president, offered an enthusiastic endorsement of the benefits of the health care measure, which is currently being litigated before the Supreme Court and contested in this year's presidential campaign.

As he issued an executive order to establish a health insurance exchange, an online marketplace where individuals and small businesses can choose among competing health insurance plans, Mr. Cuomo said it would drive down the cost of insurance while helping the 2.7 million uninsured New Yorkers get affordable coverage.

"The bottom line," Mr. Cuomo said in a statement, "is that creating this health exchange will lower the cost of health insurance for small businesses, local governments and individual New Yorkers across the state."

But it's not all good news for states that choose to go this route. Cato Institute Health Policy Director makes a strong argument that states should resist setting up health exchanges — in part because of the potential negative effect on business:

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 whiffs.

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.

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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 away?

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.

At this point, the single most effective move that states can make to block the law is to decline to set up the exchanges. More reasons why states should be wary of setting up insurance exchanges here.