Say no to Obamacare health insurance exchanges



Obamacare is unpopular, unwieldy, expensive, likely unconstitutional, and will shortly be a prime target for repeal. And the worst is yet to come: Obamacare expects states to do much of the law’s dirty work.

Obamacare presumes that states will establish “exchanges” to limit the health-insurance choices of many of their residents. A bill passed both the House and Senate in the recent legislative session that would create an exchange in New Mexico. Governor Martinez should not force us to swallow this poison pill; she should veto it.

To be sure, the letter of the law prescribes states’ “flexibility” in structuring exchanges, and some believe that it is possible to design an exchange that increases consumer choice. Two states, Massachusetts and Utah, already have exchanges. Some claim that the Utah Health Exchange is a consumer-friendly model that can blunt the most harmful consequences of Obamacare.

The Utah Health Exchange allows spouses to aggregate defined contributions from different employers. For example, suppose a husband’s employer contributes $300 per month to the exchange for health insurance. His wife works for another employer that does the same. The household has $600 to spend on a family policy that they, not their employers, choose.

The husband and wife can then decide to which of their employers they wish to affiliate, satisfying federal regulations for group coverage.

Not so fast

So far, so good: However, enthusiasm for the Utah Health Exchange must be tempered. This “premium aggregator” has never been tested: It just launched this year.

Indeed, reports from only a few months ago describe the exchange as a disappointment. Although 20 businesses enrolled on the first day of operations in August 2009, and 136 businesses in total signed up, only 13 remained enrolled by last December.

Even if the new, improved Utah Health Exchange has figured out a way to increase consumers’ choices, it is unlikely that such choices will survive the Obamacare take-over. Official sources estimate that about half a trillion federal dollars will flow into Obamacare exchanges between 2014 and 2019, and these likely underestimate the true costs of the subsidies.

The Congressional Budget Office estimates that 3 million of the 24 million people who will enter the exchanges in 2019 will come from the 162 million who would have otherwise enjoyed employer-based benefits. The actual number will be far greater. Independent analysis concludes that anyone who earns less than $80,000 annually will be dumped into an exchange.

This fire hose of subsidies explains why it is far more likely that Obamacare will corrupt Utah than Utah will manage to redeem Obamacare. President Obama and Kathleen Sebelius, U.S. Secretary of Health and Human Services, want to eliminate private choice of health insurance in favor of a government monopoly. Once the subsidies start flowing, Secretary Sebelius will be able to impose whatever restrictive regulations she wants.

President Obama’s problem

States establishing exchanges will also find that they are very expensive to operate. The Utah Health Exchange only costs about half a million dollars annually, but it has only been a pilot with a dozen businesses participating. Massachusetts’ Commonwealth Connector spent more than $26.6 million on vendors and contractors in 2009, and $3.4 million on employee compensation.

This comprises fully 3.5 percent of the money that businesses and enrollees paid into the exchange – on top of already boated insurance bureaucracies.

States counting on oodles of federal grants to offset these costs need a reality check: The new Congressional majority is committed to repealing Obamacare, and is confiscating Secretary Sebelius’ check book.

States establishing Obamacare exchanges are making a one-way, lose-lose bet. If Obamacare persists, exchanges will become bloated administrative nightmares. If Obamacare is defeated, states will have wasted time and energy that should have been directed toward that effort. Obamacare is President Obama’s problem. Don’t make it New Mexico’s too.

John R. Graham is director of health care studies at the Pacific Research Institute, which is based in San Francisco, Calif. Paul J. Gessing is president of the Rio Grande Foundation, which is based in Albuquerque.

9 thoughts on “Say no to Obamacare health insurance exchanges

  1. If we applied the same criticisms being employed against the new healthcare system reforms to duplicate military systems, ethanol subsidies, federal oil leases, forestry leases, state grazing leases, dairy subsidies, crop subsidies and the plethora of government purchases of unnecessary or over-priced goods and services we would soon find that the costs of providing Americans with quality healthcare is affordable. It isn’t a question of if we have the money. It is only a question of whether we want to continue to labor under the illusion that there is a free market of any type when dealing with government spending of our tax dollars.
    Only those stake holders who have substantial representation in the halls of Congress enjoy the fruits of the system to any significant degree. The poor, under-insured and uninsured have no such advocacy. So they are subject to the unjust and unfounded claims of for-profit insurance and healthcare systems that have stockholders as the first priority. Those who are so adamant about “free markets” and whether healthcare is a right will never be heard arguing that crop subsidies, dairy subsidies, bloated military contracts and the revolving-door-scheme of ex-congressional members and staff being employed as “consultants” after doing the bidding of corporations is also outrageous. To them it is capitalism at it’s best and the right of those involved to enjoy the fruits of the taxpayer’s labors. It is much of the same crowd who were beating the drums of war 8 years ago and have cost us over 4,000 American lives and over a trillion dollars for a useless, futile and hopeless entanglement who argue now that providing healthcare for poor working single mothers is setting us on the road to socialism and an unaffordable luxury that Americans have no right to claim.

  2. That Mr. Molitor puts the welfare and safety of the American people at the whims of business – and derides anyone who thinks otherwise with implications of communism – shows that, as usual, he is debating something that he just simply has no moral or logical understanding of.

  3. Thomas,

    You spend too much time getting angry at me and not arguing with me. Obviously, you are out of your league if you have to make snarky remarks about Das Kapital. I suppose if I am a reader of that communist screed, you must be a reader of Mein Kampf. Heil! Now please explain your compulsive need to drag in such stuff. And please explain why you need to get snarky about subjective value theory. You are the guy who does not understand the free market, for, in its name, you have endorsed all sorts of government interventions when the money moves from taxpaying citizens to corporations.

    I have no idea on which two counts I am wrong. As for the rest, your implied definition of free market is so vague that it is useless. Maybe you need to book up on the subject. (The gambit of asking me to define a term instead of defining one yourself is a little too obvious.)

  4. Michael,

    You are wrong on both accounts.
    Health care is not a right. No man or woman has the right to the services of another man or woman’s products or services. Heath care is not a privileged, either. But I am not sure what you mean by “privilege” – so please define your term.
    Heath care like any other product or service is a voluntary exchange between two parties in a free-market in which each party benefits. In a free-market economy it’s called the “subjective value theory.” Do me a favor, put down your volume of Das Kapital for a moment and Wiki “subjective value theory.”

  5. Thomas,

    I am still awaiting your response from a previous, but now forgotten, thread, to my request for your definition of a free market. You use the phrase in different contexts, and it has a different and context-convenient meaning in each context.

    Was the market a free one before the latest federal healthcare legislation? Did the federal government prevent health insurance companies from insuring, for examples, those with pre-conditons and those whose medical expenses exceeded company-defined maximums? I defy you to cite the government’s legislation, regulation, guidance, etc., which caused these denials of coverage.

    And please explain how the poor or the unemployed are to afford health care in a free market. Or please justify their rotten luck of the draw in not being able to afford and get it. Please state unequivocally whether health coverage is a right or a privilege, and, if the former, how a free market ensures it.

  6. We don’t have a free market for health care.

    The assorted perversities of American health care are represented by supporters as a “failure of the market economy” to supply essential goods and services at affordable prices. In particular, they point to the fact that the U.S. spends far more on medical care per capita than does any other country. Cost growth continues to far outpace inflation.

    The problem with this argument is that the American system of health-care provision is not actually a free-market one at all. How so? The federal government accounts for nearly 50 percent of all American health care expenditures.

    I agree with wedum59 that InsuranceCare is more suitable term than Obamacare but even that name is still not the most inclusive name to capture the other player: the federal government. I would like to see the insurance companies removed from the provider-patient relationship and the federal government as well and let the free-market work.

  7. I am a liberal. A progressive (no longer a democrat – they are just as bad as the republicans now). And even though at this point conservatives have stopped reading or considering the validity of my response, I have to laugh-out-loud because I completely agree that Martinez should veto this bill. It keeps the insurance system exactly the same as before (profits before people), and there are better options for our state. The exchanges are being pushed through ridiculously fast and when I brought that up to a representative of the company responsible for implementing the exchanges, she tore my head off and told me the debate was over so get used to the exchanges – they are happening.

    Ironically, if conservatives really want Obama to be a one-term president, they should keep their mouths shut right now. Insurance exchanges will most assuredly be a complete disaster, for providing health care and for state and federal budgets. I would love for some powerful conservatives to right this wrong and make Obama look good in the long run; allowing the states to decide the best method of health care reform that is best for each state will impress and please the voters and they will credit that improvement to Obama. So please, conservatives, keep working to defeat these insurance exchanges.

    Insurance exchanges are going to backfire on the democratic party. The negative consequences for small businesses, for doctors, for the poor, for the working middle class, etc., are going to be glaring. The only ones who are benefiting from the Affordable Care Act are for-profit insurance companies (I forget, why are conservatives against it? Big businesses making huge profits while the poor and working class die – that sounds right up their alley).

  8. Anyone who uses the term “Obamacare” is obviously a brainwashed Fox News addict. The correct term is INSURANCECARE. The insurance companies are the ones who made out like bandits in this bill. They spent an estimated $1.4 million PER DAY for nearly a year, lobbying, making targeted contributions, running scare-tactic TV ads, etc to defeat the public option and the states-rights version of single payer.

    And now, of course, they are raising their rates to replace that money, which no doubt is listed as “public relations expenses” and deducted on their income tax forms.

    We need a US Constitutional Amendment to limit contributions to politicians and PACs to US citizens who are registered to vote. That would clip the wings of these greedy corporations (and would apply to the US Chamber of Commerce and unions too of course).

  9. I can make no sense of this column. It seems to be the usual dog’s breakfast of snippets without substantiation, claims without context, and bits of ideological bombast.

    This paragraph is one example: “Even if the new, improved Utah Health Exchange has figured out a way to increase consumers’ choices, it is unlikely that such choices will survive the Obamacare take-over. Official sources estimate that about half a trillion federal dollars will flow into Obamacare exchanges between 2014 and 2019, and these likely underestimate the true costs of the subsidies.”

    Can anyone connect Utah’s ability to increase consumer choices with a federal takeover? We have unnamed “official sources”–why are they not named? would they be officials at Rio Grande Foundation or Pacific Research Institute?–declaring that future subsidies would be “likely” inadequate. And the basis for this probability is what? And the reason for thinking that between now and 2014-2019 nothing can correct anything which develops as “inadequate” is what?

    This paragraph is another: “This comprises fully 3.5 percent of the money that businesses and enrollees paid into the exchange – on top of already boated insurance bureaucracies.”

    This small percentage suggests low operating costs. The inflated bureaucracies are characteristic of the insurance companies. Indeed, they make so much many, most of them are “boated.”

    Once again, RGF reveals itself to anyone not indoctrinated in its ideology that it cannot frame an argument which can address, much less persuade, someone looking for an informed presentation of an issue of importance.