Why States Are Shying Away From ObamaCare's Health Insurance Exchanges


Should states refuse to implement the health care overhaul? As I pointed out last week, some of them already are, and now opposition to the law appears to be scoring wins in even more states. A story in Politico this afternoon notes that Tea Party activists opposing the law seem to be "finding surprising success…blocking the law's implementation." Those victories are occurring at the state level, where a number of governors are both politically sympathetic and justifiably worried about the burdens the law places on their states.

At first glance, the law seems like a trap for those who both oppose the law and favor federalism: ObamaCare calls on states to set up exchanges; in any state that does not sufficiently comply by 2013, the federal government will simply swoop in and set up an exchange on its own. That leaves governors who oppose the law in something of a bind: Either take control and set up a state-run exchange, or let the federal government step in and run things itself.

State legislators who oppose the law might nonetheless be tempted to try building and running the exchanges themselves. But there are a number of reasons why governors in that position might want to sit out the implementation process.

For one thing, states won't have much flexibility to design the exchanges as they see fit, despite the administration's protestations to the contrary. For example, we already know that Utah's exchange, which does not subject insurers to the mandates required under ObamaCare, will likely not survive. Overall, states running the exchanges will subject to federal whims: As Galen Institute president Grace-Marie Turner told me last year, "States will not be able to do it their way. They'll have to do it Washington's way."

For governors who oppose the law, refusing to set up the exchanges is also a smart move politically. Doing so forces the administration to take responsibility for whatever inevitably goes wrong during early implementation—and frees governors to criticize the law without also taking part in it. It also ensures that states budgets—which are already in deep trouble—won't be on the hook if and when the exchanges face cost overruns. Essentially, refusing to play along allows governors who oppose the law to make implementation Washington's problem.

It's clear enough that many of those working within state governments oppose the law—if for no other reason than the fact that 27 28 states are currently challenging the law's constitutionality. That alone provides plenty of justification for refusing to implement the law's exchanges. There's serious question about the law's legality, and two judges have already ruled against it. If these state governments are skeptical enough of the law's constitutionality to sign onto a lawsuit challenging it, they probably shouldn't be devoting time and resources to implementing it either.