TO: Members of the House of Representatives
FROM: Wayne Hoffman, Executive Director
DATE: March 24, 2011
RE: Senate Bill 1158

Dear Representatives:

Shortly, you will likely vote on Senate Bill 1158. This bill carries very significant public policy implications for the state. The bill authorizes spending of federal money that comes through the Patient Protection and Affordable Care Act (PPACA). The funding will lead to the creation of a health insurance exchange in Idaho. There are very simple reasons why you would want to oppose this legislation, the $2.5 million in grant funding specifically.

1. It's wrong to claim the PPACA is unconstitutional, sue to block it in federal court, but meanwhile accept funding from the very law we're suing. With all due respect to our friends in the Legislature who are supportive of this legislation -- people who I believe have purely honorable intentions -- if the Legislature approves this bill, it will be giving an endorsement and green light to the PPACA at the very same time we're suing to block it. While the law is still being contested in court, the state should not be accepting money to implement its discretionary provisions. Additionally, state officials who take an oath to uphold the U.S. Constitution have a solemn obligation to use all lawful means at their disposal to protect the Constitution. Implementing and entrenching a law that does violence to the Constitution violates that oath.

2. PPACA's insurance exchanges are not the exchanges the Heritage Foundation advocated in 2007 and earlier. Again, with all due respect to our friends who believe otherwise, while the Heritage Foundation did suggest and support the concept of health insurance exchanges several years ago, Heritage contends the exchanges contained the PPACA are not the same as what Heritage advocated. Writes Heritage's Robert Moffit, "Under the Heritage design, individuals could choose the health plan they want without losing the tax benefits of employer-sponsored coverage. The exchange we propose would be open to all state residents and -- very importantly -- be free of federal regulation. Under the president's law, however, the congressionally designed exchanges are a tool imposed on the states enabling the federal government to standardize and micromanage health insurance coverage, while administering a vast and unaffordable new entitlement program. This is a vehicle for federal control of state markets, a usurpation of state authority and the suppression of meaningful patient choice. Heritage finds this crushing of state innovation and experimentation repugnant."(1)

Today, one Heritage researcher contends there are two paths for lawmakers, one of which IFF supports:

"Some state lawmakers may decide it is in the best interest of their state to simply refuse to implement an American Health Benefit exchange and instead focus solely on their own state-based reforms that counter Obamacare. That view is understandable, and consistent with the strong opposition to Obamacare among many of their constituents."(2) The other path Heritage suggests is to develop a minimal health insurance exchange, under the promise that the federal government won't control the exchanges. We believe that will result in very bad public policy for Idaho and result in Idaho unwittingly implementing a law that is unconstitutional and that most Idahoans oppose. (See No. 3 below)

3. The claim that the state will retain control over the exchange if the state develops it is false. Because the federal government is supplying the funding for the exchange, it is highly unlikely the state of Idaho will retain control of it. The state will merely be the handmaiden for federal intervention into healthcare. Indeed, we don't even know what the federal government will demand of an exchange.

According to the John Locke Foundation, "The federal Department of Health and Human Services has not provided guidance on key questions about what exchanges should do and how they should do it.

If North Carolina is to have an exchange, legislators need to understand what ObamaCare requires it to do, what they want it to do, and what the best ways are to meet those goals."(3) We would also point out that while Utah's insurance exchange, in some ways, beats the one in Massachusetts, the Utah exchange has not proven successful.(4) In fact, Utah fails on several fronts that serve as a cautionary tale for Idaho.(5)

Additionally, the Cato Institute points out that there is no flexibility coming from the Feds in regard to the health insurance exchange: "In a February 24 letter to the nation's governors, (HHS Secretary) Sebelius extolled the four types of flexibility that Obamacare allows states in shaping their exchanges: 1) States can restrict insurers from participating; 2) states can add even more benefit mandates than Obamacare requires; 3) come 2017, states can opt out of Obamacare by creating a single-payer healthcare system; and 4) states can adopt their own 'governance structure' and 'operational philosophy.' In sum, states can impose harsher regulations than Obamacare requires and can choose who sits on their exchange's board. That's it. The only additional latitude the Obama administration has offered came when President Obama told the National Governors Association that he is open to letting them launch single-payer systems in 2014 rather than 2017."(6)

5. The exchange will expand government into an area that, once again, can be solved by the free market. The supposed functions of the exchange can already be managed or provided by the private sector. For example, anyone wanting to shop for and compare insurance policies and options can already do so online. The exchange would merely be a vehicle to grow government unnecessarily. Check out eHealthInsurance.com and Bloom Health, which lets workers use tax-free (HRA) dollars to from their employer to purchase health insurance on the individual market without creating any new government bureaucracies. To quote Ronald Reagan, "Government isn't the solution to our problem; Government is the problem."

6. Why should we borrow money from China in order to study insurance exchanges? Let's remember ultimately what we are doing here. The federal government is having to borrow from China in order to give money to Idaho so we can study health insurance exchanges. Idaho lawmakers have a golden opportunity to say, here and now, that we won't do it -- especially to help implement a law we understand to be unconstitutional.

7. Despite rumors to the contrary, the American Legislative Exchange Council (ALEC) does not have a position on the health insurance exchanges. In an email to ALEC members, the organization says that a recent article suggesting that states develop exchanges is the position of another group, not ALEC.(7)

8. ALEC does recommend that states avoid accepting discretionary federal government grants from Obamacare. Over the next several months, states will be inundated with Requests for Proposals to implement various portions of Obamacare. As much as $100 billion in discretionary grants are available, many of those grants for states to implement components of Obamacare. ALEC's recommendation is that states reject these grants and "decline to build the Obamacare edifice."(8) ALEC, thus, recommends states "reject ObamaCare discretionary grants that aid in the federal takeover of state health insurance regulation."(9)

9. An increasing number of states are refusing to implement an Exchange. According to the Cato Institute, "Florida Gov. Rick Scott, Alaska Gov. Sean Parnell, and Louisiana Gov. Bobby Jindal have flatly refused to comply with ObamaCare. Georgia Gov. Nathan Deal has pulled legislation to create an Exchange. New Hampshire's legislature has frozen the ObamaCare funds it has received pending the outcome of the lawsuits."(10)

We believe the Pacific Research Institute said it best when it said, "States establishing Obamacare exchanges are making a one-way, lose-lose bet. If Obamacare persists, exchanges will become bloated administrative nightmares. If Obamacare is defeated, states will have wasted time and energy that should have been directed towards that effort. Obamacare is President Obama’s problem.

Don’t make it your state’s problem."(11) IFF concurs with that statement.

1 Washington Post op-ed, April 19, 2010, http://tinyurl.com/y722wtm.
2 Heritage Foundation Backgrounder, March 21, 2011, http://tinyurl.com/4k8hzj6.
3 John Locke Foundation, Freedom or Exchange, March 14, 2011.
4 Pacific Research Institute, "Should Your State Develop an ObamaCare insurance exchange?" October 2010.
5 How Massachusetts' Commonwealth Connector is Better Than Utah's Health Exchange, March 11, 2011. http://tinyurl.com/4eknxdz
6 Cato's Michael Cannon, National Review, March 21, 2011.
7 March 17, 2011, email from Raegan A. Weber says, "ALEC has no official position on healthcare exchanges. There might be some confusion on ALEC's position because of an article in the January 2011 issue of Inside ALEC, from Grace-Marie Turner, about 'The 8 Things States Can Do to Push Back on ObamaCare.' In this case, Grace-Marie represents one side of the argument on exchanges. ALEC’s editorial policy for the magazine is as follows: ALEC strives to provide legislators with viewpoints and discussions on issues important to them and their constituencies. Authors submitting articles for Inside ALEC do not necessarily reflect the views or policy positions of ALEC."
8 The State Legislator's Guide to Repealing Obamacare.
9 Ibid.
10 Email from Cato's Michael Cannon to the Idaho Freedom Foundation, March 23, 2011.
11 Pacific Research Institute, "Should Your State Develop an ObamaCare insurance exchange," October 2010.