Parnell’s rejection of a state exchange

Fiscal Policy, Health Care — By on August 1, 2012 at 5:07 PM

It’s always important to give praise where praise is due, and Governor Parnell deserves praise for making a right call on Exchanges. If you haven’t been following this issue, here’s the quick version:

The proponents of Obamacare needed a way to force businesses to offer health insurance coverage for their employees. They also needed a way to enforce a requirement that everyone purchase health insurance without looking like they were forcing individual consumers to crawl up to the doorstep of an industry that they themselves have repeatedly demonized.

The model they picked was based on a regulatory agency set up by the state of Massachusetts. Massachusetts requires its citizens to buy health insurance. An individual through the exchange can buy an insurance product that meets the minimum requirements. If you can’t afford the lowest priced plan, the individual can sign up for welfare.

By requiring all states to set up an exchange like Massachusetts had, Obamacare proponents believed they had solved the problem of how to enforce the law. Subsidies would be made available to individuals entering the exchange to help pay for the insurance products offered. If an employed individual showed up to a state exchange, and took a subsidy, the IRS would be able to calculate a fine against the employer for failing to provide a health plan. If an individual complains that they are being forced to buy from evil insurance companies, populist left-leaning politicians could say, “There’s an app for that.”

At this point in the process of putting together the legislation, someone must have brought up the possibility that the states, those quarrelsome little kingdoms coequal with the federal government might refuse to set something like this up. The solution was to add into the legislation the provision that if a state refuses to set up their own exchange, the federal government could set one up for them. They did not make the subsidies available to individuals in a federal exchange.

This is a huge problem for those who support the law. If Obamacare can’t create some kind of dependency (and quick), its unpopularity may actually motivate politicians to repeal it.  This is also why Parnell refusing to set up an Alaska exchange is good for businesses AND individual employees.

It is good for businesses, because it takes away from the federal government the one tool it had to bludgeon businesses into offering a health insurance plan that is defined and regulated by the Health and Human Services bureaucracy 3,000 miles away.

It’s good for employees because some businesses will find that it is cheaper to end their company health plan, dump their employees in the exchange, and pay the fine. A governor from another state has stated that it would be cheaper for his state government to do just that with its public employees. The fine is significantly less than what it would cost to provide coverage. Parnell has neutralized that incentive by refusing to set up this exchange.

However, the issue is not going away. Consider the legislature. A member of the Senate Majority Coalition has introduced a piece of legislation to set up an Alaska exchange. The legislation, if passed would implement this component of Obamacare right here in Alaska.

While the rage in the legislative races seems to be oil taxes or the gas line, few candidates are talking about ways to open up health care markets, increase competition, and deregulate health insurance despite the fact that an ISER report has indicated that health care spending in 2010 reached almost half the wellhead value. According to the report, that’s almost half of all wages collected in 2010.

This is a very important statistic for Alaskans, in part because the crazy ideas that politicians are actually willing to consider are so different in health care as opposed to oil taxes. If a gas line is built with state funding, and the price of gas drops through the floor for the next 15 years, it’s a bad investment. It will have deep fiscal ramifications. But, no one would propose (unlike in health care) that the state force people to buy a product from the producers. In health care, that category of policy ideas seems acceptable. While the advocates of a civil society fight to make those kinds of ideas unacceptable once again, Alaskans may need to adjust their priorities. When Alaskans adjust their priorities, Juneau will follow.

Jeremy Thompson is the Executive Director of the Alaska Policy Forum.


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