November 11, 2012

Nixon: Missouri Will Not Implement Health Insurance Exchange By Federal Deadline

In a victory of sorts, Missouri Gov. Jay Nixon said on Thursday that the state will not be able to implement an Affordable Care Act health insurance exchange this year. It is not that Nixon does not want the state making an exchange — just that it has run out of time.

Under the federal health care law, states face a Nov. 16 deadline to submit blueprints to the federal government if they want to run their own health insurance exchanges when the online shopping sites are due to open in 2014. If states don’t set up their own sites, the federal government will run one for them.

Nixon said he would prefer Missouri run its own insurance exchange. But that’s not possible, at least not at this point. Voters on Tuesday passed a ballot measure barring the governor from taking steps to establish a state-run insurance exchange without legislative approval. The Legislature has not granted its approval. And it’s not scheduled to be in session until January, meaning lawmakers could not meet the Nov. 16 deadline even if they wanted to do so.

It is a good thing voters explicitly blocked the governor from instituting the exchange, given the governor’s statements. As the news report notes, just days ago Missourians resoundingly passed Proposition E, which prohibited the creation of a health insurance exchange without voter or legislative approval. Given the governor’s position in favor of the state exchange and the timing of his announcement, it appears he may have considered acting unilaterally to implement the exchange if the avenue was still available.

Why is the state-run vs. federally-run exchange issue important? As I said when I wrote about Oklahoma’s challenge to the ACA:

Many employers under the ACA can be fined/taxed if they do not provide health insurance to individuals who qualify for the federal government’s subsidies. However, if a state does not build its own exchange, then no employee would qualify for the subsidy, and therefore employers in the state would not be subject to the tax because none of their employees would meet the criteria set out in the law.

No state exchange? Then the law’s text suggests that there would be no employer penalty.

More to the point, a state-created exchange does not mean an exchange effectively run by the state; such exchanges will still have to comply with the rules the federal government imposes, as Christine Herrera and I explained earlier this year in an editorial in the Southeast Missourian.

The theory of a state-run exchange, designed to navigate and subsidize the purchase of health insurance, is simply that — a theory. Rules that officials in Washington issued to implement the law say that every detail of Missouri’s exchange must have the approval of federal bureaucrats.

And because federal grants and subsidies will flow through state-based exchanges, Washington will always be able to control Missouri’s exchange through ongoing regulation. This “my house, my rules” scenario underscores the new parent-child dynamic occurring between Washington, D.C., and the states, and the Missouri Senate was right to reject the governor’s ability to implement an exchange.

I support returning greater power to the states, which are often closer to the governed and better engaged with their problems. Put simply, a state-based exchange under the ACA is, for all intents and purposes, a federal exchange, effectively controlled by the federal government and designed to implement federal policy. The governor is right to prefer more localized solutions to big federal government solutions. Unfortunately, a state-based exchange does not further that objective.

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