Terry Kilgore. Photo credit: Times-Dispatch
by James A. Bacon
Under the provisions of Patient Protection and Affordable Care Act, the 50 states must set up health insurance “exchanges,” marketplaces where individuals and small businesses will find it easier to acquire coverage, by 2013. If they don’t, the federal government will step in and set up the exchanges for them.
Gov. Bob McDonnell is no fan of Obamacare, but the law is the law… and he’d rather Virginia run its health care exchange than let the U.S. Department of Health and Human Services do it. And Virginia legislators agree.
“Virginia can and should set up its own health-care exchange,” said Del. Terry G. Kilgore, R-Scott, chairman of the House Commerce and Labor Committee, as quoted by the Times-Dispatch.
The purpose of the health care exchanges is to fill gaps in the health insurance marketplace that make it prohibitive for individuals and small businesses to obtain health care coverage. One critical component of the exchanges — a requirement that everyone either obtain coverage or pay a penalty — is under legal attack, however, and probably won’t be considered by the U.S. Supreme Court until next year. Because the exchanges will rely upon the participation of healthy people to keep rates down, they likely would go into a death spiral if the Supremes invalidate the mandatory coverage.
That creates tremendous uncertainty for state officials. The Times-Dispatch reports that the legislature is awaiting an overdue report from the governor’s Health Care Reform Initiative Advisory Council before making key decisions about how to craft the law. Another big question is whom to put in charge of the exchanges. There is some sentiment to make it a responsibility of the Bureau of Insurance under the State Corporation Commission.
Just remember: Health exchanges are a government-engineered solution to flaws that government that created in the first place. The problem arises from the fact that health care insurance obtained through employers is tax deductible, whereas insurance that individuals purchase on the open marketplace is not. Thus, the entire medical insurance industry is organized around selling insurance to employers, not the ultimate customer — in contrast, say, to the auto insurance industry. Inserting employers between insurers and patients sets into motion a whole train of dysfunctional and expensive behaviors too lengthy to detail here.
Needless to say, however the exchanges are crafted, they will be imperfect, and there will be cries for further fixes. State government undoubtedly will be more responsive than the federal government, so the pragmatism of McDonnell, Kilgore and others is probably justified.
