The Internal Revenue Service recently held a hearing that could have major ramifications for Obamacare's much-ballyhooed insurance exchanges. The agency is trying to change the way the federal government hands out subsidies through the exchanges. There's one problem, though -- the IRS doesn't have the power to rewrite the law.
The uncertainty surrounding the exchanges offers state governments a tremendous opportunity to halt Obamacare's implementation.
By refusing to establish exchanges, state leaders can force Congress to revisit the disastrous law -- and replace it with reforms that will actually improve the accessibility and affordability of health insurance.
Obamacare instructs states to set up health insurance exchanges where consumers and small businesses can look for coverage starting in 2014. The exchanges would effectively put health insurance -- and the delivery of care -- under the control of the feds, who would dictate what policies would look like and how doctors would treat patients with exchange-provided coverage.
The feds have further stipulated that people can only access billions of dollars in tax credits and subsidies earmarked for the purchase of policies by shopping in the state-run marketplaces.
If a state refuses to set up its own exchange, Obamacare allows the federal government to come into the state and set one up.
But here's the rub. The text of the law stipulates that only state-based exchanges -- not federally run ones -- may distribute credits and subsidies.
Without the federal cash, consumers won't patronize the government-run exchanges -- particularly with all the cost-inflating mandates they impose on insurers who wish to participate.
The Obama administration has said that Congress didn't mean to draw a bright line between federal and state-chartered exchanges.
But it's not the president's job to determine congressional intent -- that's up to the legislative branch and the courts.
A major legal battle is doubtless on the horizon. In the meantime, state officials should force the federal government's hand by daring them to set up exchanges they're not empowered to fund.
In many states, that's happening. To date, only 17 states have passed the necessary legislation to establish their own exchanges.
Florida Gov. Rick Scott sent back a $1-million federal exchange grant, as did Louisiana Gov. Bobby Jindal.
Asked about the decision, Scott, a former health-care executive, was blunt: "I don't believe in the exchange. It doesn't do anything to improve access to care. It does nothing to drive down health-care costs."
Scott and Jindal are right to be concerned. Obamacare's other insurance regulations are forcing private insurers to pull out of certain states, where they're facing huge potential losses thanks to the law.
Obamacare's defenders claim that the exchanges will expand consumer choice. With insurers exiting state markets across the country, the opposite appears to be true.
In fact, the exchanges may represent the first stages in the death of private insurance.
If Obamacare's exchanges and other rules prevent private firms from making money writing health-care policies, they'll get out of the business. At that point, the government may feel justified in setting up its own plan to fill the void -- and the march toward government-run, single-payer health care will be under way.
The Obama administration and congressional Democrats may be kicking themselves over the errors they're discovering in their signature law.
But for state officials -- and American patients -- anything that arrests the implementation of Obamacare is a blessing in disguise.
Sally C. Pipes is president, CEO, and Taube Fellow in Health Care Studies at the Pacific Research Institute. Hal Scherz, M.D., is a urologist in Atlanta, and Founder and President of Docs4PatientCare.
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