Alabama Governor Robert Bentley has made the right decision not to set up the health exchanges created by The Patient Protection and Affordable Care Act (PPACA). Contrary to what some state Democrats and other supporters of big government say, Bentley’s decision is legally and fiscally on solid ground.
Given the Supreme Court opinion upholding PPACA and the re-election of President Obama, the assumption that PPACA, his single major accomplishment from his first term, would face little resistance to its full-implementation was wrong from the beginning.
Neither the Supreme Court decision nor President Obama’s re-election guarantees that PPACA will ever be implemented. In fact, there are lawsuits against PPACA already in federal court, including a case filed by the state of Oklahoma arguing that the federal government does not have authority to force employers into the program if the state has not set up an exchange.
Some Democrat legislators have accused Bentley of violating federal law but that couldn’t be more wrong.
States are under no obligation to set up health exchanges. The law clearly makes it optional for states to establish their own exchanges or to allow the federal government to establish one. The problem with that is while the law allows the federal government to set up exchanges, as pointed out above, it does not provide for the federal government to administer premium-assistance tax credits nor impose fines on the individuals and businesses that do not participate.
PPACA, as passed by Congress and signed into law by President Obama, clearly restricts the administration of the premium-assistance tax credits to the states. Both the Department of Health and Human Services and the IRS dispute this but their arguments are parsed in terms of the intent of the law instead of what the law clearly states. This dispute will most likely be settled in federal court, possibly at the Supreme Court level, but as the law now stands, the federal government has no authority to create this new entitlement or impose taxes on those who refuse to participate. This function is clearly reserved only to state-run exchanges.
Some proponents of the law also argue that if the state doesn’t act, the federal government will act in its place to run the exchange and the state will lose control. The problem with that argument is that even if a state sets up the exchange, the real control is with the federal government. The state really does not control them.
Not only would states have no real control, they would foot the bill for administrative costs. In Alabama, that could run from $30 to $50 million per year. If states do not set up exchanges the administrative costs shift entirely to the federal government. That becomes a huge problem because funding for the federal exchanges must be authorized by Congress. Even if the courts declared that the federal government has the authority to impose the taxes and administer the premium-assistance program as the IRS claims, Congress would still have to pass legislation appropriating the funds.
With Republican governors saying “no” to the exchanges and with the Republicans still firmly in control of the House, that is not likely to happen.
Governor Bentley is making the right decision not to set up the health exchanges and not to expand Medicaid. He is also advocating the right approach to health care reform. Bentley and other Republican governors are pushing reforms that will allow people more freedom in their choices regarding health insurance. He specifically cited the state of Utah model that is “…a free-market exchange that allows more choice and has all these different plans and it’s managed by the states, not the federal government.”
The objective of the states that are refusing to set up exchanges is to make PPACA impossible to implement and to bring about new health reforms that provide affordable health care coverage, give people more choices, respect the rights of individuals, and that don’t bankrupt states or the federal government. According to some estimates, repealing PPACA and replacing it with state-focused reforms as suggested by Governor Bentley and other Republican governors would save Alabama $300-$500 million over 10 years and reduce the federal deficit by at least $2 trillion.
In that regard, Governor Bentley and his fellow governors are making the right decision for their state and they are making the right decision for the country.