Wednesday, February 20, 2013

Research of Exchange Facts


A friend and fellow Representative, Wendy Horman, has written the following lengthy explanation of the research that she and the 16 freshmen have undergone to make our decision regarding a non-profit, independent insurance exchange in Idaho.  I thought I’d share it here, to provide additional information for all of you. 
Thank you, Wendy, for all of your work on this and for the great information.

Thank you for your letters outlining your concerns about the federal health care law often referred to as the Affordable Care Act, or Obamacare.

I have received many emails outlining a variety of positions. I appreciate knowing your opinions and am pleased to share with you some of the information I have found in my review of the issues related to state vs. federally imposed or federal partnership health exchanges. I ask your forgiveness on the length of the letter, but I determined that rather than giving a quick “thanks for writing” response to the many people who have emailed, I thought this issue deserved more depth and explanation which took me some time develop. The length of the letter itself speaks to the complexity of the issue and is not an exhaustive treatment of the exchange but specifically responds to emails I have received.

I have always felt that our state is better at responding to the people of Idaho than the federal government.  After thorough review of the options, I believe the state would be a better buffer and protection for the citizens of Idaho than allowing the federal government to impose its version that would undoubtedly have higher costs and likely drive up the cost of health care insurance in our state even more.

The Affordable Care Act is a federal law, and as such, I have no jurisdiction over that law as a state legislator.  That authority rests with our federal delegation members in Washington, DC. The situation I find myself in as a state legislator is challenging, because the options before the Idaho Legislature at this time are limited. Obamacare is the law of the land and one of a select number of choices states can make is whether to establish a state based exchange, or allow a federally imposed exchange or federal partnership exchange to be enacted in our state by the federal government.  The federal law is very clear on this point that in the absence of a state exchange being established, a federal exchange will be imposed.  There simply is no option to prevent any exchange from being enacted in Idaho.  Perhaps some of you are at liberty to ignore federal law but I have sworn an oath to uphold the law to the best of my ability so help me God. I believe you would be as disappointed in me as I would be in myself if I failed to honor that oath.
I would also point out an issue that is often lost in this whole debate; what exactly is an exchange and will Idahoan's have to use it?  In researching this question, it has become clear that first and foremost, these exchanges are not mandatory.  We all have the choice to continue receiving health insurance from our employer or to purchase our own insurance through the agent we've worked with in the past.  In short, Obamacare requires, and the Supreme Court upheld, the provision requiring that we purchase health insurance, but we are not required to buy health insurance on any exchange.

The other key point is what an exchange actually is; an online marketplace where individuals and small businesses may choose to shop for insurance. I recognize the concerns expressed about federal spending that can only increase our national debt, but again, these are outside my ability to change from my position in the Idaho State Legislature. The exchange provides transparent, comparable information on the health insurance policies available, the coverage each policy provides and the costs associated with each policy.  The goal of the exchange is to provide a site where individuals and small businesses can make educated decisions on health insurance coverage for themselves and their families or employees.  

Equally important to what a state exchange is, is what it is NOT.  A state based health exchange is not an endorsement of Obamacare.  State health exchanges are marketplaces and are a concept first envisioned by the conservative think tank the Heritage Foundation.  Passing a state based exchange neither improves or impedes our ability to fight the federal law and it certainly is NOT an endorsement of it.

S1042, the State Exchange bill now being considered, has language reflecting the exchange is to be a voluntary, competitive marketplace.  With that said, I was uncomfortable with the lack of legislative oversight in S1042. With the additions of H179, legislation I support in the House, there is additional oversight to ensure an Idaho exchange remains a free-market approach to an exchange, legislative oversight and approval so we can ensure fees associated with the exchange remain as low as possible.  A federal exchange would have none of these oversights, which is another reason I believe that Idaho should lead its own destiny on this particular issue, not the federal government.

COST - WHO PAYS?
The establishment and initial operation of a state health exchange would be funded through a series of federal grants, just as the federal government is funding the establishment of their exchange that will be imposed in those states that don't enact a state exchange.  I share many of your concerns about deficit federal spending; sequestration may be a few short days away at this point.  But one advantage of a state exchange going forward is that the operation will be funded by exchange participants through user fees or assessments not tax dollars. Based on the two bills under consideration at the Legislature, these fees would only cover the cost of running the exchange. S.1042 is very clear on the point that the State and taxpayer is not responsible for the cost of maintenance of the exchange.

“41-6105(2)(b) The exchange shall be financially self-supporting and shall not request any financial support from the state and shall not have the power to tax or encumber state assets;”

The legislation provides that the exchange can assess fees from participating health carriers and exchange users to cover the maintenance costs to operate the exchange. I recognize that these fees ultimately are collected by carriers from consumers to cover the cost, but again - would we prefer that they go to the federal government? Also, the additional language in H.179 requires the exchange board to inform the legislature of any fee changes. This will allow the legislature some oversight of the fees and help better ensure the lowest possible cost for operation and maintenance.

“41-6106(2) For any changes by the board to the fee schedule charged to exchange users or participants, the exchange shall, at the next legislative session, report to the appropriate senate and house of representatives germane committees on or before January 31.”

On the other hand, the U.S. Department of Health and Human Services proposal to fund federal exchange operations is a fee of 3.5 percent on premiums from policies purchased through that exchange. Therefore, as premiums increase, fees automatically go up. I believe that a board made up of Idahoans that includes small businesses, individuals and health care providers will best ensure the lowest possible fee to manage the lowest possible cost for an Idaho exchange marketplace. One final point that deserves to be reiterated is that purchasing insurance from the exchange is voluntary. If you do not support it or want to buy insurance there, you don’t have to; that choice is left up to you.

THE FEDERAL GOVERNMENT WILL NEVER GET AN EXCHANGE RUNNING
I can't rely on the possibility of failure on the part of the federal government.  Everything I read, see and hear indicates the federal government is moving full steam ahead to have an exchange up and running that will be imposed in all states that have not acted.  At the time that I must make this decision, Obamacare is the law of the land, and I am not at liberty to ignore federal law.  As recently as the week of February 11th Health and Human Services leadership reported updates on the federal exchange to the Senate Finance Committee.  An article covering the hearing clearly noted the progress that has been made, and highlights of plans to get the federal exchange up and running by the 2014 deadline.  I have seen no facts pointing to the demise of a federal exchange being imposed on Idaho if we fail to act on a state exchange.

OKLAHOMA LAWSUIT
With respect to comments received about the Oklahoma lawsuit filed by Oklahoma attorney General Scott Pruitt against the Affordable Care Act, this case was originally filed in 2011 and most recently revised in September of 2012, focusing the argument that the Internal Revenue Service IRS can't enforce the Affordable Care Act's taxes against businesses whose employees receive federal health insurance subsidies because Oklahoma has not set up a state health exchange.  The heart of this lawsuit continues to rely on a legal argument that the drafting of the federal law only applies tax penalties and credits to state based exchanges. In other words, a state-operated exchange is essentially different under the federal law and the federal law is sufficiently specific to prevent the taxes from being levied in the state.  There are many legal opinions on both sides of this issue. I’ve reviewed some and would be happy to pass them along if there is an interest.  Having said that, all of this is still a legal argument and Obamacare is still the law of the land at this time.  I cannot rely on a legal argument.  I supported that path last year as we approached the Supreme Court decision on the individual mandate and constitutionality of the federal law.  That roadblock to implementation was lost and I cannot justify further risk to allow the federal government to impose a federal exchange in our state that may further drive up insurance costs.  In addition, should this legal argument hold true, I believe our Governor and the Idaho Legislature can move far more quickly to disband a state-based exchange than the federal government could ever hope to act on a federal exchange. If we create it, we can “uncreate” it. H179 provides those assurances.

Abortion Policy
Some comments I received referenced David Ripley and an opinion he asserts that "any implementation of Obamacare is going to result in increased government funding of abortions, and probably a big spike in the number of abortions."  As someone who strongly believes in the sanctity of life, I have researched this particular aspect thoroughly.   I cannot influence how any other state government will act under the law. What I do know is the federal law clearly and specifically allows states to prohibit abortion coverage:
"A State may elect to prohibit abortion coverage in qualified health plans offered through an Exchange in such State if such State enacts a law to provide for such prohibition." ACA §1303(a)(1)
The Idaho Legislature in 2011 exercised its right under ACA §1303(a)(1) to protect the unborn by enacting a prohibition against health plans providing abortion coverage through any qualified health insurance exchange in Idaho - whether state-based or federally imposed.  Idaho Code 41-1848(2)


TAX PROVISIONS IN ACA
Regarding the tax provision someone else referenced on home sales, there is a provision in Obamacare that is a capital gains increase or “surtax” that will impact some taxpayers.  This federal law has a surtax of 3.8% on the modified adjusted gross income (AGI) for individuals making $200,000.00 or more, and for families making $250,000.00 or more.   It applies to capital gains tax rates and it also applies to some capital gains on real estate.  On a primary residence, it is applied to profits or gains in excess of $250,000.00 for singles and $500,000.00 for families.  I agree with your concern and don’t support this tax provision, but it is federal law.  As a state legislator, I have no authority to address or change it.
Also, this provision is not dependent upon the type of exchange that Idahoans access – it is the law whether we have a federal exchange, or a state exchange.  As state legislator, I do not have authority over repeal or amendment of this federal law.

In conclusion, I have no vote on the Affordable Care Act. The choice before me is whether Idaho citizens will use a federal or state exchange to access options for purchasing insurance should they voluntarily choose to use an exchange. I support a state exchange over a federally imposed exchange as the option that best prevents any steps toward a nationalized single-payer health care system. I also believe this path best protects the citizens of Idaho.

Letter Prepared by Rep. Wendy Horman (R), Idaho Falls, Idaho

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