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October 10, 2013

State-, federal-run exchanges would have same effect

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In “Governor wrong about exchange, and he knows it” (Sept. 28), Sam Hall took Insurance Commissioner Mike Chaney’s side in the dispute with Gov. Phil Bryant over whether Mississippi should have run its own Obamacare health insurance exchange. Permit me to offer some clarifications and a somewhat wider perspective.

The first clarification involves the interaction between the decision not to run the exchange and the decision not to expand Medicaid to adults with incomes up to 138 percent of the federal poverty level, or FPL. There are about 50,000 adult Mississippians with incomes between 100 percent and 138 percent FPL. Since they will not be eligible for Medicaid coverage, they will instead qualify for coverage through the exchange.

Hall correctly notes that those enrollees’ exchange coverage will be heavily subsidized by federal taxpayers but gives the impression that the state must run the exchange for that to occur. In fact, in all the states not expanding Medicaid, people in that income group will get the same level of federal subsidy for exchange coverage regardless of who runs the exchange. For example, Idaho is not expanding Medicaid but is running its exchange. Yet, the 50,000 Mississippians and the 28,000 Idahoans in this income range will be treated exactly the same.

Hall also discusses the lack of state regulation of the so-called “navigators,” who will be helping people sign up for exchange coverage and relays Chaney’s legitimate concerns about the absence of oversight. I share those concerns, but once again, this is an issue that is entirely separate from the question of whether the state or federal government runs the exchange.

While Obamacare bars states from requiring that navigators be licensed insurance agents, it is also very explicitly says that navigators must comply with any other state professional licensure requirements that are not contrary to federal law. In response, a number of states have enacted laws requiring navigators to meet requirements similar, though not identical, to those for insurance agents. Particularly noteworthy is that despite staunch opposition in Missouri to having the state-run the exchange —the Legislature refused, and the voters even approved a ballot measure to enforce that position —Missouri enacted navigator licensing requirements and standards, and authorized its insurance commissioner to enforce them. There is no reason Mississippi could not do the same.

Mississippi is not the only state to refuse to run its own exchange. Thirty-three other states have declined as well —and with good reason. While Obamacare offered states federal grants to set up exchanges, the law also stipulated that after Jan. 1, 2015, the exchanges would have to be self-sustaining. Thus, any state agreeing to run an exchange would also be taking responsibility for indefinitely funding its operating costs; yet, all of the exchange’s functions and activities would continue to be subject to detailed federal regulation. No wonder more than three-fifths of the states told the feds, “Thanks, but no thanks.”

So far, there is little evidence that state-run exchanges are getting any better insurer participation than those run by the feds. Of the 34 states with federally run exchanges, Mississippi and five others (Alaska, Alabama, Maine, North Carolina and Wyoming) each attracted only two insurers. Yet, among the smaller group of 16 states and the District of Columbia that chose to run their own exchanges, four of them (Delaware, Hawaii, Rhode Island and Vermont) also attracted only two insurers apiece.

In general, the more rural states already tend to have less insurer competition, and that continues to be the case in the exchanges as well. For instance, Iowa and Arkansas are the two states closest in population to Mississippi. Four carriers are participating in Iowa’s exchange, but more than half of Iowa counties will have just two insurers competing directly. Arkansas has three insurers in its exchange, but in a third of Arkansas counties only one insurer will offer coverage. Elsewhere, New Hampshire and West Virginia will each have only one insurer participating in their exchanges.

Insurers throughout the country appear to have made their exchange participation decisions based mainly on their own business considerations, which should not be all that surprising.

By running its own exchange, a state commits to funding its long-term operations but in the process gains very little additional control. If the federal government instead runs the exchange, the evidence indicates the end results will be basically the same. The main difference is that the state won’t have to pay for it.

- Edmund F. Haislmaier is senior research fellow in health policy at the Heritage Foundation.

Originally appeared in the Clarion Ledger

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