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Testimony: Health Care Reform and the PPACA

by Regina Meena

Testimony of Regina Meena, Public Policy and Legislative Affairs, Wyoming Liberty Group

Casper, Wyoming, October 11, 2011

Health Care Reform and the PPACA

During the past year and a half, the Wyoming legislature and Governors have focused on implementing two components of the Patient Protection and Affordable Care Act (PPACA).  Those components are the exchanges and the Medicaid expansion known as “Healthy Frontiers.”  I am here today to talk about why it is now necessary for Wyoming to shift focus away from implementing the federal act, and toward reforming health care through free market solutions. 

This coming spring, the Supreme Court of the United States will hear the lawsuit brought by 26-states and small businesses regarding the constitutionality of the individual mandate requiring the purchase of health insurance, and it’s severability from the rest of the act.  This ruling, expected in June of 2012, will determine Wyoming’s next steps.  Specifically, do we take a gamble and continue expanding government-run health programs in the hopes that funding will be there and results turn positive, or do we begin reforming our health care system to create affordable health insurance options that give people choices and lessen our dependence on federal funds?

To understand what’s at stake, we must consider what would happen if Wyoming continues to implement the federal act and the Supreme Court rules the individual mandate unconstitutional.

The individual mandate requiring the purchase of health insurance is crucial to the functioning of the PPACA.  Without it, the other components cease to function and the act eventually collapses.  The most severe ramifications affect the exchanges.

Exchanges and Medicaid Expansion

Exchanges depend upon mandatory participation in order to create a sizeable risk pool for cost sharing.   They perform two essential functions: expand Medicaid up to 400% of Federal Poverty Level, and determine income eligibility for expanded Medicaid programs and premium subsidies.  Without a requirement to enroll in government programs or purchase health insurance, low participation rates cannot produce low-cost insurance premiums or increase the number of insured.  Utah’s exchange continues to struggle with these results as they did not require insurance purchase.

Exchanges experience adverse selection when people in poor health enroll in plans in greater numbers than healthy people.  In order to remedy this, some insurance regulators are openly advocating banning insurance companies from selling policies outside the exchanges, leaving the state-run exchanges as the sole market of individual and small group health insurance.  Others simply propose applying exchange regulation to all health insurers, even if they operate outside the exchanges.  The effect of both policies would be the same: to get rid of individual and small group insurance sales outside of the exchanges.

It is not sound public policy to push ahead with implementing any part of the federal act that expands Medicaid.  To attempt this through executive branch authority followed by legislative approval is particularly tricky.  The governor will need a statute if his actions have a legal binding effect on unwilling parties into the future.   Typically, when implementing a new program ahead of legislation, the executive branch secures services through contracts,  follows with agency rule making, and finally proposes legislation to ratify creation of the already established program.  This method forces the legislature to undo what is done.  If they do this, the governor could veto that action and force the legislature to override it.  Not being able to do that, the legislature has two choices, they have to pass legislation to conflict with it or not fund it.  Either way, the governor, Legislature and Wyoming citizens lose.  Wyoming cannot afford to gamble with taxpayer money by expanding Medicaid before the US Supreme Court rules on the requirement to purchase health insurance.  Even the smallest amount of Medicaid expansion is the line we don’t want to cross.

Hold off on pursuing any exchange related activity until after the 2012 ruling.  Without demand for federal health insurance, it is unlikely that HHS will be able to establish an exchange.  Congress has and will continue to whittle away at HHS resources and decrease funding.  Deadlines will be pushed back due to state bi-annual legislative sessions that are not scheduled to meet before 2013.  It is highly unlikely that HHS can establish operational exchanges in huge states like Texas and Florida nor can it establish operation exchanges in the remaining 46 states by 2014. Also, there is no language allowing HHS to authorize the subsidizing of individuals within a federally run exchange.  The federal act expressly states tax credits are for insurance purchased through an exchange established by the state.  Furthermore, PPACA states that health insurers operating in exchanges, whether state or federal, must be licensed to do business in the state where the exchange functions.  A state facing the threat of a federally imposed exchange can simply pass a law revoking the license of any health insurer participating in that exchange.                 

Federal Funding

Once the individual mandate is eliminated, funding to the Health and Human Services for other components of the act will disappear.  Specifically, there will be no funding for; the newly eligible under the Medicaid expansion, premium tax credits, enhanced provider rates or grants to establish the exchanges and all their required functions. This means the state will pick up all expansion related costs equal to our FMAP formula under the existing Medicaid plan amendment rules.

Block Grants and Structural Changes       

Wyoming must prepare for changes to the federal funding mechanisms that Congress is currently considering.  One proposal would force a reduction in federal Medicaid contributions by altering the formula used to set the matching rate.  The block grant would give us great flexibility in reconfiguring Medicaid. The second would curtail states’ ability to raise money through taxes on Medicaid providers.  Wyoming is one of four states who does not tax providers.  Unlike other states, Wyoming is not in a fiscal crisis nor did we compound fiscal obligations by expanding our Medicaid program and adding to our Maintenance of Effort (MOE) requirements.  Many of the states currently establishing exchanges are expansion states seeking relief from the financial burden. This has given us an advantage in positioning our state for true health care reform.

Wyoming’s Golden Opportunity    

The solution is for Wyoming to create affordable health insurance options purchased in competetive markets across state lines that return us to consumer-drive insurance like we enjoy with auto, life, property and supplemental health plans.  Opening health insurance to nationwide competition will create low-cost options that the Utah and Massachusetts exchanges have not been able to.  Competition between well-managed plans yields products with services that are age appropriate and consumer-driven. 

What do we do:

1)      Move forward on building an Integrated IT framework that will perform income eligibility determinations for all of Wyoming Social Services agencies.   This may require legislation and apply for funds to HHS to demonstrate Wyoming is complying with the federal act.

2)     Begin removing the barriers to free-market health insurance by passing legislation that allows health insurers with a business in Wyoming to sell policies that they sell in other states.

3)      After we establish low cost insurance options, transition folks into low cost markets, and pare down and reconfigure Medicaid programs to best serve our most vulnerable citizens.       

Expanding government-run health programs will not achieve health care reform.  Creating affordable health insurance options through free markets can.

Madam Chairman, thank you for the opportunity to present our solution to health care reform.  I am happy to answer any questions the committee may have.

Regina Meena

Wyoming Liberty Group is a public policy research institute.  Its work is devoted to helping citizens understand public policy in light of constitutional principles and government accountability.  For more information please visit www.wyliberty.org.

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