Testimony for HB 1297, relative to health insurance exchanges
Rep. Andrew J. Manuse, R-Rockingham 5 (Derry)
N.H. Senate Commerce Committee | April 24, 2012
I have come before you today to introduce and support HB 1297, which would prohibit New Hampshire from implementing a state health benefit exchange under the so-called Obamacare Act, the federal “health care” overhaul enacted by Congress against popular demand in 2010.
A health benefit exchange is the mechanism the federal Health and Human Services Department would use to enforce the provisions of Obamacare, such as the individual mandate we already said could not be enforced in New Hampshire when we passed SB 148 last year, and the taxes, and penalties the act requires businesses to pay.
The federal health overhaul entices states with the choice to create a state operated exchange or rely on a federal operated exchange. In effect, they are no different; the federal bureaucracy would control either version.
Yet, a state exchange would cost the state an additional $10 million to $30 million a year to run starting in 2015—money we just don’t have—just to pay for state officials to follow the federal government’s orders. Even if we do end up with Obamacare, HB 1297 would save New Hampshire money.
The language of HB 1297 as amended by 2012-1786s is simple and comprehensive. It would be inserted in RSA 420-N, updating the responsibility of the Joint Health Care Reform Oversight Committee to guide the state’s executive branch in protecting New Hampshire from the federal law.
With amendment 2012-1786s, HB 1297 would give state officials guidance on how they should interact with federal agents in the event that the court does not overturn the federal act in its upcoming decision or if the federal act is not repealed by Congress. Specifically, the amended HB 1297 would direct state officials to maintain a free market for health insurance to the best of their ability under the federal law.
On top of this, the language of HB 1297 takes advantage of a flaw in the federal law that relies on states creating their own exchanges. The law did not provide for the contingency that states would refuse to set up exchanges, and because of this, by New Hampshire not creating a state exchange along with other states, it will be more likely that the federal health insurance overhaul would be repealed or amended.
If the court overturns the law or if the law is repealed, most of the changes we’re introducing today would be deleted, but the prohibition on creating a state-run exchange and a new general state policy favoring free-market health insurance would remain in place.
In Conclusion, this bill as amended provides for every possible outcome and maintains the state’s stance against the federal act; yet, it still ensures New Hampshire maintains its ability to regulate health insurance on its own, regardless of what happens next.
What’s wrong with Obamacare?
With my support for HB 1297 and the amendment before you today, I’m starting from the premise that Obamacare is bad public policy. Just two years past the federal law’s adoption, we are already seeing the president’s lofty promises fall apart, and that’s before the law takes full effect in 2014.
According to a report from the Congressional Budget Office released this spring, Obamacare will cost taxpayers $1.76 trillion by 2022 but still leave 27 million Americans uninsured, an increase in the number of uninsured from today. Of the 23 million who receive coverage through this monumental new expense, about 20 million people will be dumped onto the Medicaid program, problems unresolved.
Businesses will either pay a penalty for not covering their employees, or they will have to pay the cost of much higher premiums. In New Hampshire, a full time employee at minimum wage would cost an employer with family health insurance a minimum of $26,000. For anyone looking for work after Obamacare, these costs will mean fewer available jobs.
Additionally, many folks may not be able to find a doctor willing to accept their new Obamacare coverage, and many elderly people will face the harsh reality that there is a bureaucracy in Washington deciding whether they will be covered for that essential treatment or whether painkillers will have to do the trick.
For those of us who understand the true costs of the new health insurance overhaul—and above are listed but a few—there is some hope that the Supreme Court will rule in June that the individual mandate is unconstitutional or might even throw the whole law out. Waiting for that decision, however, is not in the best interest of the state. That’s why we must act to pass HB 1297, which provides the best protection for New Hampshire’s private health insurance markets while also preparing for any contingency.
Do you have a better solution than Obamacare?
It’s important that we don’t simply propose a repeal agenda as part of this effort. I’m hoping that the coming failure of Obamacare gives new life to the possibility that we might return to free market principles in health insurance—principles that have been missing for about 100 years.
I’d like the state to let insurance companies offer true insurance plans without all the mandates, so people have an option to pay for most basic medical services out of pocket, and the insurance would cover serious illnesses and accidents. A la carte add-on coverage should also be allowed.
Medical savings accounts, tort reform and out-of-state competition are certainly part of the equation, but also important is restoring a real sense of cost to the medical care and health insurance markets. When people have to pay for an elective MRI, for instance, just like they do corrective eye surgery, we might start to see expensive procedures performed only when they’re necessary.
But we must first act to stop the implementation of Obamacare before we can move forward with other, free-market reforms. That’s what HB 1297 is all about.
What is a state health benefit exchange?
As the Arizona-based Goldwater Institute puts it, state created exchanges are in fact “government-sanctioned cartels where only government-approved insurers can sell government-approved insurance.” In other words, a state exchange is the full implementation of Obamacare in New Hampshire. The only difference is that we get to pay for it, too.
A state exchange would be responsible for running an insurance program, running an 800 number hotline, developing a risk adjustment program, defining and monitoring network adequacy and service areas, monitoring marketing materials, determining whether any particular treatment or doctor’s visit should be covered, and funding and monitoring companies or other organizations performing public information and eligibility requirements, among other bureaucratic duties. It uses taxes, penalties and subsidies to pick winners and losers in the health insurance market. We simply don’t want to create a system like this. It is bound to fail, and cost us substantially in the process.
What can New Hampshire expect relative to funding a state health benefit exchange?
RSA 420-N, created through HB 601 last year, established the Joint Health Care Reform Oversight Committee and also sent back $666,000 of health insurance exchange planning grant funds. HB 1727 has been submitted this year to send back the remaining $333,000 of the grant, which the Executive Council recently rejected. That’s $1 million in federal money that would pay to plan a state exchange already on its way out.
Federal funds for the implementation and operation of a state health insurance exchange end as of Jan. 1, 2015. The law itself explains that whomever establishes exchanges must pay for them using state “assessments and user fees,” “provider taxes,” “state revenues” or “other sources.” Are we as a Legislature ready to raise taxes again for something we don’t want?
According to research conducted by HTMS, a North Dakota health care consulting company, a North Dakota state health insurance exchange would have cost that state $10 million to operate. The same firm found that the average estimate for state exchange operations is about $28 million a year. Some states have estimated a cost of $47 million. Vermont’s exchange would cost about $11 million a year. It’s reasonable to expect a New Hampshire exchange would cost the state somewhere between $15 million and $30 million a year to operate.
With spending interests in this state focused on roads, education, police, fire, state services, paying down debt, tax cuts and similar ideas, I ask you this: Where do we get the money to pay for a state exchange that we have no real control over?
Rejecting health insurance exchange money is already the well-established position of this Legislature, and for good reason. HB 1297 would make sure our department officials know that rejecting the money to study the establishment of an exchange also means that we do not want to establish one—for sure.
Does a state exchange protect state interests?
You may have heard from some officials that a state insurance exchange under Obamacare will protect state sovereignty and ensure our ability as a state to maintain “local control” over our health insurance markets. This position is dangerously wrong. According to the Idaho Freedom Foundation, federal law surrounding state exchanges contains the word “require” 628 times, “shall” 22 times, and “must” 439 times. Every single element of a state plan must be approved by the federal department of Health and Human Services, meaning that the state has no autonomy whatsoever. If New Hampshire’s exchange did not comply with federal guidelines, or even the mere whim of the HHS department, we would be forced to make changes.
According to the federal law, exchanges can be established “only as prescribed by the HHS Secretary.” States may adopt only those exchange laws and regulations that “the secretary determines implements the standards within the state.”
Besides the clear language of the Obamacare bill that gives the U.S. HHS authority to dismantle and rewrite our exchange to suit their needs, the law says this about state exchanges: “An exchange may not establish rules that conflict with or prevent the application of regulations promulgated by the Secretary of Health and Human Services. Further, the secretary of the general accounting office will have continuing oversight of changes.” An exchange must “support and complement rule-making conducted by the Secretary of the Treasury.” Not only that, a state exchange must follow defined “minimum essential benefits,” and the secretary of the federal HHS department may define more at his or her whim. In other words, the regulations can be changed at any time, and our state exchange would have to live up to them.
Does this sound like we will maintain any control over this process?
What do we gain by rejecting a state health benefit exchange?
So far, the judges in all of the court cases against Obamacare, even those that came out against the constitutionality of the law, have said that states that implement a state exchange but then ask to overturn the law are acting hypocritically and make it difficult to rule in their favor. In other words, how can the court rule Obamacare unconstitutional when the states are voluntarily signing up for it?
According to the Idaho Freedom Foundation, the states would do themselves a favor by rejecting a state exchange, which would force the federal government to draft new legislation to fix problems with the language drafted as part of the Obamacare law, or simply repeal the bill all together. Because of a flaw in the law that gives tax breaks only to individuals in a state that have a state exchange, by not creating a state exchange, we are ensuring unequal treatment under the law and thus another constitutional challenge against the law—and this is a good thing.
The Cato Institute’s Michael Cannon says: “States thus have the collective power to deny the Obama Administration the legal authority to dispense more than a half-trillion dollars in new entitlement spending, to expose the full cost of the law’s mandates and government price controls…—simply by not creating Exchanges.”
That means even if the Supreme Court upholds the law as constitutional, we can still exert leverage as a state to force the law’s change or repeal.
Let me leave you with a few thoughts in summary:
A recent New York Times article said “the success of President Obama’s health care overhaul … depends on the creation of … health insurance exchanges.”
Exchanges are critical to enforcing the individual mandate, which we already declared unconstitutional by passing SB 148. SB 148 provided that a resident of New Hampshire shall not be required to obtain, or be assessed a fee or fine for failure to obtain, health insurance coverage. In other words, it nullified the individual mandate.
Even if you wanted to create a state exchange, and I think we assuredly don’t, it is still too premature to jump into this state exchange game. As I understand it, there really isn’t a deadline for creating a state exchange, because even the states which have moved forward can’t meet the deadline.
With a state exchange, we would be on the hook to pay for it– some $15 million to $30 million a year. We wouldn’t have to pay this amount if we defaulted to a federal exchange. A federal exchange would be no different than a state exchange.
Creating a state exchange entrenches the law in New Hampshire, regardless of whether it’s ruled unconstitutional or repealed. President Obama is cheering on the creation of state exchanges, because each state that creates one makes his dream of implementing Obamacare closer to reality. As the Cato Institute’s Michael Cannon noted, “It is easier to repeal a theoretical bureaucracy than a real one.”
Cannon also notes: “creating an exchange is not a hedging-your-bets strategy but a sabotaging-your-bets strategy.” This is because by creating a state exchange, we voluntarily agree to Obamacare and the price tag that comes with it. If we don’t create a state exchange, yes, we push the can down the road, but we at least maintain our options to determine what is the best course forward for New Hampshire. More than likely, Obamacare will either be ruled unconstitutional, repealed or drastically changed. In any of those cases, we do not want to have volunteered to create a state exchange.
Cannon also emphasizes that there is no such thing as a “market-friendly” government bureaucracy. To verify his point, Mr. Cannon illustrates Utah’s “market-friendly exchange” created in 2008. When Utah politicians saw that health insurance was more expensive inside their exchanges than on the open market, they imposed a series of taxes on consumers outside the exchange to prop up the health plans inside it.
While guaranteed issue and community rating—two things we already have in New Hampshire—are a part of the Act, also critical to the Act’s implementation are the exchanges and increase in medicaid eligibility requirements, two unconstitutional factors.
Finally, I’d mention to you that the House has asked our Attorney General to join the 26-state lawsuit against Obamacare, which is now pending in the Supreme Court. If we truly want to do this, we should not adopt a strategy that will make us complicit in the law we’re trying to overturn. The U.S. Supreme Court will rule on this case in June, likely at least throwing out the individual mandate, but possibly the entire law. Any consideration of a state exchange that entrenches the law in New Hampshire is a bad idea.
HB 1297 as amended by 2012-1786s would give the Insurance Department and HHS Department guidance as to how to interact with federal agents should the law move forward, but definitively says New Hampshire will not create a state exchange on its own and saddle the state with millions of dollars of costs while entrenching the law into state statute before its fate is decided.
Please review the following research concerning the merits of this bill:
- Manuse Plan Would Protect N.H. From Obamacare Exchanges (Josiah Center for Public Policy Studies)
- A State-run Federal Exchanges is the Worst of Both Worlds (Josiah Center for Public Policy Studies)
- Josiah Center for Public Policy Studies General Research on the Bill
- New Hampshire Republicans Continue Fight to Repeal and Replace Obamacare (N.H. Republican State Committee)
- N.H. House Bans State Exchanges (New Hampshire Watchdog)
- No Obamacare Exchanges (Cato Institute)
- Should New Hampshire Create a Health Insurance Exchange? (Cato Institute)
- Just Say No to Implementing Obamacare (Cato Institute)
- States Must ‘Just Say No’ to Federal Health Insurance Exchanges (Goldwater Institute)
- States Should Return Obamacare Grants, Pursue Own Health Care Reforms (Heritage Foundation)
- Flaw Gives Rise to Reject Health Care Exchanges (Idaho Freedom Foundation)
- Fixing Health Care in New Hampshire (RLCNH)