OSPRI Suggests Alternative Before Rushing Through Health Insurance Exchange Legislation

OSPRI Suggests Alternative Before Rushing Through

Health Insurance Exchange Legislation


Speculation Surrounding Federal Law Should Give Lawmakers Pause

Providence, RI – April 7, 2011 The Ocean State Policy Research Institute (OSPRI) cautions RI legislators to consider all factors and options before rubber-stamping the health insurance exchange legislation that is currently working its way through the General Assembly.


The RI House of Representatives will soon debate a very important issue regarding health care for our citizens; the formation of a health insurance exchange, as provided for in the Obama administration’s controversial Patient Protection and Affordable Care Act (PPACA). A bill to create such an exchange in Rhode Island  has already breezed through the RI Senate, without any serious opposition, and will soon be taken up by the House.


According to OSPRI’s Executive Director, Mike Stenhouse, there is a better path for legislators to consider, “All Rhode Islanders want to see more options and lower prices for health insurance. Instead of conforming to a massive, federal government controlled system, Rhode Island should consider Health Insurance Compacts, which will allow free-market competition to reduce prices and consumers to have more choices.”


Health Insurance Compacts are agreements between states that authorize out-of-state insurers to compete for business, in much the same way that auto and property insurance are purchased.


“The insurance compact model would create larger markets, more competition, more choices, and lower prices”, continued Stenhouse. OSPRI will be publishing a comparison of the two systems within a few days. “With regard to the PPACA model, the federal law is in a very unstable political and legal state. As recently as April 5 Congress passed changes that rewrote the way health exchange subsidies will be paid for; and more changes to the law are expected. Why should RI rush into creating a new, costly infrastructure that is based on a controversial federal law that is in such a state of speculation?


There are many arguments why this particular government-controlled system should not be implemented at this time in Rhode Island:


  • Federal policy is in a precarious state of flux: Even President Obama recently announced that he favored significant changes to his health care reform, and there is much uncertainty about what future changes might come down the road from Washington. PPACA is also under attack by conservatives in Congress, with strong threats to deny funding. There is a real fear that if RI implements an exchange in the PPACA mold, that the federal government, being the unreliable financial partner, would never be able to provide the federal funds that our legislators may anticipate.


  • Federal health care reform legislation may be unconstitutional: PPACA has been ruled unconstitutional by federal courts in Florida and Virginia. This legal uncertainty underscores the danger or RI taking the time, expense, and risk of implementing an exchange system based on federal legislation that could be thrown out as unconstitutional. While these decisions are currently being appealed by the Obama administration, if a new administration were to be elected in 2012, it is almost certain that the new Department of Justice would drop its appeals, meaining PPACA would remain “unconstitutional”.


  • Impact on businesses. Has our General Assembly evaluated how businesses will react? OSPRI has spoken with many business owners who honestly believe that PPACA will increase health care premium costs to the point where it may be more prudent for them to dump health coverage for their employees and pay the federal fine. How would this make RI a more competitive state for business? We are not aware of any local studies that have looked into this important part of the issue.


  • Federal Strings. The RI legislature is chasing federal funds, which of course means a multitude of federal regulations and mandates. Given all the uncertainty surrounding the PPACA, it would be unwise for RI to implement one of its major components at this time, especially when the funding – or the law itself – could dry up at anytime. Furthermore, it is highly likely that additional federal guidelines will evolve about how these exchanges should operate in order to be compliant with this volatile federal law. As recently as April 5, 2011 Congress passed changes that rewrote the way health exchange subsidies will be paid for.


  • Lawmakers should avoid painful and pointless votes. With all of the other problems our state confronts, and the multitude of choices our General Assembly must make in the coming months, why would we risk wasting debate on an issue that could have profound positive or negative effects on so many people, where federal funding may never be provided, and while there is so much uncertainty.


  • Government vs Free Market: the very idea of a government controlled exchange is antithetical to our nation’s historical and more effective free-market principles, which is the only proven way to consistently deliver a quality service at the lowest possible rate. A true free-market “is” an exchange in itself! If we simply allowed open competition via interstate compacts, a wider variety of affordable plans would be available for consumers and businesses. There is not a universal consensus that PPACA would achieve the savings it portends … many believe it could actually raise health care costs.


“If Rhode Island wants an effective insurance exchange, we should craft our own interstate compacts, based on free-market competition, with no federal strings attached, and utilize our own funds so that we have some form of self-ownership and free ourselves from all the uncertainty and errors caused by the hasty passage of the federal health care reform in the first place,” said Stenhouse.


If pressed by advocates of immediate action on health care reform, lawmakers and concerned citizens should ask: Why – for something this important – shouldn’t we make these decisions only after the uncertainty around PPACA has played itself out and interstate compacts are thorouhgly investigated as a potential viable alternative?


OSPRI does not believe that RI should risk wasting the valuable time of our General Assembly and the health of our citizens, while such legal, financial, and legislative risks are inherent. We should not risk jamming tens of millions of additional liabilities into our already strained state budget.


“Right now, PPACA is presenting major problems for the Obama administration. Our lawmakers should take all precautions to ensure that it does not become Rhode Island’s problem as well,” concluded Stenhouse.


The Ocean State Policy Research Institute (OSPRI) is Rhode Island’s leading research and educational institution promoting free market solutions for our state’s critical issues.


OSPRI is grateful to Dan Greenberg and our friends at the Advance Arkansas Institute, which provided valuable research for this brief.

For more information, go to www.OceanStatePolicy.org or contact the Institute at 401.228.6691 or info@oceanstatepolicy.org.

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