Obamacare Grant a Step in the Wrong Direction

State legislators have given the green light for the Department of Insurance to spend $12.4 million in federal grant money to set up a preliminary health insurance exchange.  These funds, considered a “Level One” grant, will be used to hire consultants, temporary full-time employees, and purchase IT services and software.  A health insurance exchange, in theory, is a marketplace for people and businesses to purchase insurance plans.  Setting up an exchange is a component of the Patient Protection and Affordable Care Act (Obamacare).

Despite several pending legal challenges to Obamacare, involving more than half of our nation’s states, some states are choosing to press on with health insurance exchanges.  The Supreme Court is likely to consider these constitutional challenges by June 2012.  While the North Carolina Legislature signed a friend-of-the court amicus brief supporting the 26-state Florida lawsuit, our legislative leaders have not signed on to any official legal challenges and instead have chosen to accept federal assistance to begin an exchange.

Accepting this grant money is in addition to a bill passed by the House this summer.  HB 115, sponsored by Republicans, would create a state exchange with a mixture of industry representatives, consumers, and legislative and governor appointees on the exchange’s Board.   Fortunately, the Senate has yet to take up this legislation.

Insurance Commissioner Wayne Goodwin has recently warned that if legislators do not take action by next June in the short session, the state will potentially lose additional federal funding.  Supposedly, June 30, 2012 is the deadline for the next step, a Level Two grant that requires actual authorizing legislation to operate an exchange.

However, no decision needs to be made until the Supreme Court ruling is determined. For starters, the federal government continues to delay its deadlines.  In a recent press release, the Department of Health and Human Services announced a six-month extension for Level One grant applications.  The new deadline is June 29, 2012, only a day before the supposed Level Two deadline and in the same time frame as the likely Supreme Court decision.

Why would North Carolina waste time, money and resources setting up an exchange when the first grant application must not be submitted until the Supreme Court decision is made? Some may argue that there is no consequence to accepting Level One funding because the state is not obligated to repay the grant money and Level One does not actually require setting up a functioning exchange.  The federal funding is through a drawdown grant, meaning states receive the money as needed instead of receiving a lump sum.  But let’s not forget that every decision has consequences.

While the state will not have to repay the $12.4 million Level One funding directly, state taxpayers will still be on the hook.  North Carolinians pay both state and federal taxes.  It’s easy for state legislators to forget that federal money is not free.  Taxpayers fund these grants – including North Carolina taxpayers.  Additionally, the minute North Carolina funds an exchange, it will create a vested agency and lobbying core that will see to its continuation, regardless of whether Obamacare is found unconstitutional.

Finally, proponents will argue that the state setting up its own exchange, instead of the federal government, will give the state more flexibility and allow free market concepts into the exchange’s operation.   Sadly, the idea of a “free market exchange” is a contradiction in terms.  States will be burdened with all of the regulatory and administrative rules imposed by federal law with very little opportunity to respond to changes in competition and market costs.  Instead, the federal government will determine who can participate, both on an individual consumer and corporate insurance level.  The federal government will also determine what insurance plans must minimally cover.  States can only offer additional prohibitive and cost-increasing mandates.

Therefore, despite the hysteria mentality of “use it or lose it” and the urgent insistence of the Department of Insurance, there is no reason to rush into an exchange until Obamacare’s constitutionality has been determined once and for all.  Until then, let’s study the detrimental effects of Obamacare on our state and find ways to provide alternative solutions to solve our healthcare issues.