Business Ethos Blog

Need for Health Care Exchange

Now that Obamacare has been upheld by the Supreme Court the states must move toward implementation. One major part of the implementation is for each state to set up an “exchange”. We have heard a little about this in Michigan. Governor Snyder has asked the legislature to pass a bill to set up a Michigan exchange. The Republican-controlled legislature first said that they wanted to wait until after the Supreme Court gave its opinion with the hope that this move would be unnecessary. Now they are saying let’s wait until after the election because if Romney is elected Obamacare might be repealed and again no need to set up an exchange.

What is an exchange? In general, an exchange will dispense health care insurance subsidies and regulate coverage. Specifically, the states must form the exchanges to verify who is eligible by income and residency, police compliance with the individual mandate, report those who do not have private insurance to the IRS, regulate insurers, enforce price controls and penalize companies that don’t provide insurance to their employees. Obviously, this is a huge task and will require a major new bureaucracy. The first step is to have a state legislature pass a bill to set up the exchange or have the Governor set it up with an executive order. If the states are not making progress by mid-November of this year, a federal exchange will be imposed. The exchanges must be running by October 2013 for coverage in 2014. Is it the “Right Thing to do” to further delay this legislation in Michigan?


Let’s look at some issues:

1. To date, only 13 states are making any progress to establish an exchange, impacting about 1/3 of the US population.

2. For those trying to implement an exchange there are 109 separate milestones. Massachusetts is doing the best with 56% completed. California is at 44%, Oregon and West Virginia at 30% and New York at 6%.

3. Many states run by Republicans, for example Michigan, are refusing to cooperate. It is projected that at least 30 states will be subjected to a federal exchange.

4. There is a major roadblock to the imposition of a federal exchange. According to the Obamacare statutory text, only state-run exchanges are allowed to pay subsidies. Since this is a major provision of the law, we are headed toward a show-down as to whether or not the federal exchanges will make the payments. HHS has said this is a minor oversight and has chosen to ignore this requirement.

5. HHS is running out of money to implement the Health Care law. Democrats originally allocated $1 billion for implementation to be split with the IRS. Congress needs to provide HHS another $750 million next year. The House so far has refused to do this. Without their new allocation, HHS will be in no position to set up a federal exchange.

6. As an aside, the IRS inspector general has called Obamacare the single largest set of tax law changes in 20 years and affects millions of taxpayers. The agency will be hiring 1,278 new people this year and another 859 in 2013 just to deal with this law.


Are the Michign lawmakers “Doing the Right Thing?” Despite the ongoing uncertainty of the implementation of Obamacare and the high cost and complexity for Michigan to build a new exchange bureaucracy, we must move in that direction. At a minimum, the legislation should be passed and work started to avoid the imposition of a federal exchange. It boils down to local control and who you trust to do a better job for Michigan—a federally imposed exchange or an exchange developed in Michigan for Michigan? I vote for Michigan. I am reminded of the saying, “Hi, I’m from Washington and I’m here to help.”