Before last week’s Joint Labor Committee meeting in Casper, Governor Mead sent a letter to the chairs of the committee—Senator Charles Scott and Representative Elaine Harvey—strongly supporting Wyoming’s pursuit of a state-run health insurance exchange under Obamacare. The letter is rather cryptic as to how this will happen, and JP Eichmiller’s reporting on the meeting describes a game of hot potato between legislature and the Governor as to who will take responsibility (the letter is also available for download here). The letter has rightfully caused concern over Governor Mead’s use of executive orders or other circumvention of the legislature, and Wyoming Liberty Group continues to follow developments on this front.
One part of Governor Mead’s letter needs correction, and I provided that to the Governor in a letter last week. Governor Mead believes the following:
If, by January 2013, Wyoming is not substantially prepared for implementing an exchange, the federal government will move to operate an exchange in our state. This would require ceding substantial authority for individual and small employer insurance along with Medicaid eligibility and enrollment processes to the federal government.
This error is understandable; this section of Obamacare has been repeated so many times it’s practically a
chant. Sometimes it’s a threat: either we set up an Obamacare exchange, or the feds will do it for us. Nothing like friendly federalism from our comrades in DC, eh? Fortunately, although Obamacare includes this explicit provision, another section of the law makes any federal exchange unworkable. As I stated in my letter:
Section 1321 of the PPACA (codified at 42 U.S.C. § 18031) does indeed give the Secretary of Health and Human Services the power to establish and operate an exchange if Wyoming is not actively establishing one by January 1, 2013. However, § 1401 of the Act (codified at 26 U.S.C. §36B) limits the premium assistance tax credit for exchange enrollees to those exchanges “established by the State under [§] 1311 of the [PPACA]” (emphasis added). In short, if the federal government establishes an exchange in Wyoming pursuant to § 1321, lower-income individuals (those the exchange is meant to serve) will not qualify for federal subsidies and the exchange will be unworkable under the law.
This may have been an unintended oversight in drafting the PPACA, but the IRS may not create tax credits out of thin air. For this to be fixed, Congress would have to amend the PPACA. Since the November 2010 elections, the chances of this happening are slim to none.
This revelation came early last month, but has not garnered enough attention. Avik Roy provided excellent
coverage at the Forbes Blog, and law professor Jonathan Adler gives a full legal breakdown at the Volokh Conspiracy. It seems all eyes are focused on the individual mandate litigation, now knocking on the Supreme Court’s door. But even if the mandate is upheld by the United States Supreme Court, this omission in Obamacare provides states more ground upon which to successfully resist implementing the federal health care leviathan.
Governor Mead should pull his support for any kind of exchange and instead focus on market-driven policies, such as the interstate sale of health insurance.
“…However, § 1401 of the Act (codified at 26 U.S.C. §36B) limits the premium assistance tax credit for exchange enrollees to those exchanges “established by the State under [§] 1311 of the [PPACA]” (emphasis added).”
Should 1311 above be 1321???
Darryl,
No. Section 1321 allows the feds to set up the exchange if the states don’t set one up pursuant to section 1311. The point is that a federal exchange set up by the feds under 1321 does not qualify for the tax credit given to state-run (1311) exchanges.
The appropriate response to this unconstitutional federal mandate is nullification, if not a resolution of secession. As it is now, Obama says “Jump!” and Mead says “How high?” So much for independent Wyoming spirit…
So let me see if I get this right.
The US gov asks states to set up health insurance exchanges in order to make it easier for small businesses and individuals to buy health insurance.
The Feds will give states money to do this. The Feds will also give individuals and small businesses financial help to buy insurance if they qualify. The Feds also give the states considerable latitude to do things as their exchange as they want.
But your position to the Feds is “No, I don’t want you telling me i have to do things my way. I want you to do things your way in my state, even if it means that money won’t be available for individuals and small businesses in my state.”
So tell me what part of that makes sense.
Jimmy,
The US gov commands states to set up health insurance exchanges to supposedly make it easier for small business and individuals to buy health insurance, which they are commanded to do pursuant to the individual mandate. All insurance must meet the new federal coverage requirements, etc.
The Feds have given minimal, non-binding grants to study the exchanges. Discussion at the exchange committee meeting as recently as last month revealed that Health and Human Services does not actually have the first clue itself as to how these exchanges will supposedly operate, pointing rather sadly to Utah. Unfortunately, Utah’s participation rate in their state-based exchange is lackluster, because (surprise) few will enter unless they’re forced into it.
My position is that individuals and small businesses are perfectly capable of buying health insurance if it’s allowed to return to a cost-effective indemnity product. Auto, life, homeowners insurance, supplemental health insurance like Aflac… somehow, we manage. Ignoring another government-run fiasco and freeing up the insurance market are key– starting with interstate sales to allow Wyomingites to access properly-sized insurance pools. There is no silver bullet: it took a long time to dig this hole, it will take along time to get out.
Absent the ability to give tax credits, the feds will either not make the move or will be tied up in litigation. I don’t doubt there are some bureaucrats in DC capable of ignoring reality, but the political consequences of trying to set up such a federal exchange would be dire. If you haven’t noticed, it’s not like this so-called national “reform” has much love to lose.