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Flaw gives Idaho another reason to reject health insurance exchanges

Flaw gives Idaho another reason to reject health insurance exchanges

Wayne Hoffman
September 17, 2011
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September 17, 2011

Congress hopelessly mangled a tax incentive designed to get people enrolled in Obamacare health insurance exchanges — and that fatal flaw should be more than enough to convince Gov. Butch Otter and state lawmakers to reject this government-orchestrated mess.

Under the letter of the Obamacare law, participants in state-based health insurance exchanges are supposed to be eligible for health insurance premium assistance via a tax credit. But that assistance is available to those who “were enrolled through an exchange established by the state” under Obamacare.

The word “state” is important. The statute says nothing that would allow people enrolled in a federally-created exchange to participate in the program.

“There is a technical problem in the law. I don’t see how you get around that,” Vanderbilt Law School Professor James Blumstein told Investor’s Business Daily, which broke the story Sept. 7.

The IRS is trying to pretend the error doesn’t exist and has proposed regulations that would extend the tax break to people regardless of whether they’re in the state exchange or the federal exchange. But Congress screwed this one up, and only Congress can fix it.

The IRS cannot, by itself, extend a tax credit to where Congress did not intend it. In short, a key financial incentive for people to sign up for health insurance exchanges will not exist — unless the states act to implement health insurance exchange and give cover for Congress’ goof.

Gov. Butch Otter indicated last month that he may apply for a $40 million federal grant to help Idaho start building a state health insurance exchange, and Republicans and Democrats on a legislative committee nodded in approval.

Proponents of a state-designed health insurance exchange point out that, under Obamacare, if the state fails to build a health insurance exchange, the feds will, and then the federal government will basically control the health insurance market in Idaho. A state exchange will keep Idahoans in charge, they claim.

They’re dangerously wrong. The state can’t create an exchange that is autonomous and independent from Obamacare’s regulations. Were Idaho to do so, the federal government would rule the state out of compliance, demand changes, and if those changes don’t occur, the federal government will still step in and operate the exchange itself.

A state exchange created by the Legislature might have the superficial appearance of being “under Idaho control,” but let’s not kid ourselves; it is still very much a federal beast. Obamacare was purposefully designed to coerce states into building health insurance exchanges under threat of federal intervention.

Congress couldn’t simply compel the states to do the federal government’s bidding. So the next best thing was to tell states, “You don’t have to do this, but we will if you don’t.” Several states have already called the feds’ bluff and have rejected creation of an insurance exchange. Idaho has yet to move to create an exchange, but it hasn’t rejected it, either.

It’s always been apparent that Obamacare implodes without the mandate that everyone buy insurance and without health insurance exchanges. The individual mandate is already on thin legal ground. And now, the exchanges are also shakily positioned.

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