October 3, 2011 1:19PM

Heritage Scholar Urges States: Don’t Implement ObamaCare Exchanges, Send Back Grants

Back in March, Heritage Foundation scholar Ed Haislmaier wrote that states could blunt ObamaCare’s impact (A) by creating non‐​ObamaCare compliant, “consumer‐​centered” Exchanges and/​or (B) by creating ObamaCare‐​compliant, “defensive” health insurance Exchanges. Many states, including some that are suing to overturn ObamaCare as unconstitutional, saw this as a green‐​light from the free‐​market groups and forged ahead with creating an ObamaCare‐​compliant Exchange.

In a blog post last week, Haislmaier recanted on Strategy B. He writes that “defensive” Exchanges won’t blunt the impact after all, and that states should refuse to create any type of ObamaCare‐​compliant Exchange and send back all federal ObamaCare grants:

Initially, while HHS was still deciding how to implement the legislation, a narrow window of opportunity existed for states to pursue a “pushback” strategy of creating a restricted exchange and requiring it to contract with the state’s Medicaid program and insurance department to perform the eligibility, enrollment, and insurance regulation functions that state lawmakers seek to retain control of. HHS effectively closed that window in its proposed exchange regulations issued in July…

The combined effect of these regulations and grant requirements are that a state would have to agree to surrender any last vestiges of meaningful control over how Obamacare is implemented. Thus, a state would now have no more real control over an exchange it set up than over one HHS established

Consequently, at this point the best course of action for states is to neither apply for nor accept exchange establishment grant funding.

Free‐​market groups are now united on these points.

Haislmaier still recommends that states pursue Strategy A: a “consumer‐​centered,” non‐​ObamaCare Exchange using only state‐​government dollars. As I explain here, however, there is no such thing as a non‐​ObamaCare Exchange. Insurance carriers will not patronize non‐​ObamaCare Exchanges, and the federal government will commandeer them or push them aside to create an ObamaCare Exchange. Creating any type of Exchange merely lends manpower to ObamaCare’s federal takeover of health care. States should refuse.