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Obama’s Health Care Exchanges: Myth versus Reality

October 04, 2012 J


Many states are considering an important question: whether to create a health care exchange to implement the President’s health care law.  Exchanges are being sold as a simple, innovative tool to inform consumers’ purchases.  However, these exchanges are far from simple or innovative; throwing thousands of pages of regulations on states and insurance markets.  As Pennsylvania decides whether to implement this provision, it’s important to separate myth from reality.

Myth One: If Pennsylvania doesn’t create an exchange, the federal government will. Reality: There is really no choice between a state and federal exchange.

The Obama administration keeps talking about the “flexibility” a state has to create an exchange, but the thousands of pages of regulations tell a very different story. Pennsylvania, and all other states, must first receive approval from the Department of Health and Human Services to create the exchange with the Secretary having sole discretion to determine compliance. Then, any subsequent change must also be approved.  All meaningful control is retained by Washington bureaucrats not Pennsylvania policymakers.  There is no choice; it’s all federally controlled.

Myth Two: Health care exchanges are good for businesses in Pennsylvania
Reality: A state-based exchange creates a new $3,000 per employee tax on businesses

In a rush to pass the bill lawmakers made a huge drafting error that will raise taxes on businesses in Pennsylvania if you set up an Exchange.  If a business does not provide “affordable” coverage to an employee, the employee can then purchase insurance through an Exchange and becomes eligible for federal tax subsidies.  The employer is then subject to a $3,000 fine for each employee that’s eligible for the subsidy.  However, because lawmakers didn’t even read the bill before they passed it, only individuals purchasing from a state-created Exchange are eligible for a tax credit; federal Exchanges are not eligible.  In other words, setting up a state-based Exchange will subject businesses in your state to higher taxes.

Myth Three: Consumers benefit from the lower cost insurance available via an Exchange
Reality: Insurance premiums will rise as a result of the President’s health care reforms

Burdened by mandates, restrictions and the problems of community rating and guaranteed issue, the Exchanges will fail to provide accessible and affordable health care insurance. In fact, a recent study commissioned by the State ofWisconsinfound that individual market premiums will increase by an average 30% under the new law’s provisions. A similar study inOhiofound premiums would increase 55 to 85%.

It’s clear.  Pennsylvania should not implement Obama’s health care exchanges.
Please Support HB2655 to block the exchange.

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