States Should Opt Out of Obamacare Exchanges, Says the Goldwater Institute


In a short and pithy video presentation, Arizona's Goldwater Institute explains why states should flip the bird to the Obama Administration by refusing to implement health-insurance exchanges, leaving the feds to handle the heavy-lifting on their own. Goldwater points out that health-insurance exchanges will report non-compliant residents to the IRS, and leave employers open to fines for each employee not covered at a level that satisfies the folks in D.C. Exchanges also opens the door to more corporate welfare for health-insurance companies.

What the Goldwater video doesn't mention is that shifting the burden for health insurance exchanges to the feds effectively sabotages the implementation of Obamacare. As the Washington Post reported in November, the feds are really not prepared to take on the complicated task of setting up exchanges for each state, all of which must be done separately because of varying local laws, markets and conditions. Not surprisingly, the task involves integrating antiquated Medicaid computer systems with current technology to make the online exchanges work.

By the end of this week, states must decide whether they will build a health-insurance exchange or leave the task to the federal government. The question is, with as many as 17 states expected to leave it to the feds, can the Obama administration handle the workload.

"These are systems that typically take two or three years to build," says Kevin Walsh, managing director of insurance exchange services at Xerox. "The last time I looked at the calendar, that's not what we're working with."

The number of refusenik states is now over 20, making the task that much more daunting. Our own Peter Suderman has delved yet more deeply into the challenges of setting up health insurance exchanges.

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  1. Was talking with my father yesterday who is an administrator at a community college in FL. His college has 90 part-time employees who work 30 hours or more a week. The college’s choices are (a)pay $675k(!) per year to get them benefits (which is a huge number. But I guess $7k/year is the clearing price on insuring someone through their insurer.) (b)pay the penaltax and hope it is significantly less (c)cut these employee’s hours to less than 25 per week and hire more part time employees. That’s in addition to $1.25M they had to find this year due to rising premiums on currently covered employees. He estimates that for the same cost ($1.9M), the college could have given every salaried employee a $2000/year raise and every hourly employee $1.50/hr. I was stunned by the numbers. I assume that private companies are facing the same sort of pressures. Healthcare cost is going to eat any recovery that happens over the next three years.

    1. Wow. That’s a chunka change.

    2. (c)cut these employee’s hours to less than 25 per week and hire more part time employees.

      Someone linked to something on the AM links thread that the ACA also has a provision about full-time equivalent employees–i.e., a provision designed to make this option less attractive/impossible.

      Basically, if you have two part-timers working 20 hours a week each, they count as a FTE, so if you decrease hours but increase staff enough to still be over 50 FTEs, you’re fucked.

      1. I would assume if this comes true and isn’t successfully evaded by accounting tricks, opportunities for “internships” are going to abound at higher education institutions in the coming years.

        1. I mean it’s almost like they all got together and said “what can we do to make employing people suck as much as humanly possible?”

        2. Automate wherever possible and outsource.

          1. I can see small “consulting” companies becoming common for lots of tasks.

            1. Outsourcing.

              The people that empty the waste can in my office — outsourced

              The people that guard the doors — outsourced

              The people that run the cafeteria — outsourced

              Half of the drudgery of engineering work — outsourced

              And on it goes ……

    3. They can do (b) drop insurance coverage and pay the $2,000 per employee penaltax. That is $180,000 per year, a savings from (a) of $495K per year.

      1. Yeah, it’s $2k THIS year. So when Congress sees that they can charge $7k, then what? What happens if they stick in an additional $10k per head penalty for dropping employee hours that were previously subject to penaltax? When the numbers don’t add up in 2014, does this sound crazy, or exactly what congress will do?

        1. They’ll do just what they wanted to do all along: blame the free market for Obamacare’s vast failures and institute a federally-run single-payer system.

    4. pay the penaltax and hope it is significantly less

      It is. For now. $2,000/employee if they don’t offer insurance at all, with a different penalty schedule if they do, but some of their employees still hit the (state) exchange.

    5. Yeeee-up. For all the talk about the fiscal cliff causing another recession (on top of the one we are still in), Obamacare is going to cause another.

      1. The punchline is that whether your company gets tagged for penalties in 2014 depends on your headcount this year.

        So OCare will be a drag on the employment market in less than a month.

        1. The layoffs and reductions in hours have already begun.

  2. Like anyone’s gonna listen to the Goldwater Institute…

  3. 2 to 3 years to build a system like this?

    Sure, if your dealing with private sector companies who give a damn about the bottom line.

    Since we are talking about integrating multiple disperate government agencies with multiple different large private corporations all of whom exist in a heavily regulated market I’m betting it takes them 2 years to even settle on the initial requirements and issue contracts to the primary vendors, the 3rd year will be spent primarily building the various teams that will have to coordinate and working out how the hell they are going to communicate with each other and then the final 2 years will be spent on a Death March to a hard delivery date at which point something barely ready for Alpha will be slammed into production. Then they’ll spend at least another 5 years fixing the bugs and resolving the various lawsuits that the different agencies/vendors have with each other for non performance.

    1. Ah, you worked on the State of FL payroll system modernization, too, eh?

    2. Done some .gov IT contracting, I see.

    3. Hmm. Sounds like a good time to be a specialist in IT commercial litigation.

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