| March 17, 2011

Health insurance exchanges and federal funding

Following Gov. Mary Fallin’s announcement a few weeks ago that Oklahoma would accept more than $54 million in federal funds to begin implementation of a health insurance exchange, I blogged about the “concept” of health insurance exchanges as a useful idea (absent Congressional effort to change the federal tax code) in a patient-centered, free-market health system.

It is important to add, however, that OCPA has never advocated acceptance of federal funds – especially federal funds that have to be printed or borrowed − to accomplish state goals that are not a “core” function of state government.

To be clear, OCPA believes the state should not use federal dollars to implement a health insurance exchange.

If state leaders conclude an insurance exchange is vital for reducing costs of care and increasing access to care for consumers, the state should appropriate state dollars to build it. Even then, insurance exchanges are not without risk. Any effort to build a new state entity entails an inherent risk of expanded bureaucracy. Utah’s health insurance exchange, which has been lauded by me and other conservatives as a model for states to follow, has had its share of problems, including lack of participation by employers (though that has more to do with the way the plans were rated than anything else). And Utah’s exchange certainly didn’t cost $54 million to build. That exchange cost Utah taxpayers approximately $600,000 to build and roughly $600,000 to operate on an annual basis.

Essentially, what the Heritage Foundation promotes is a website – a centralized online “marketplace” that is lightly regulated, where transactions costs are reduced, where all types of health products could be bought and sold, where all insurers could participate and compete, and where competition would promote real choices for consumers. As Utah has shown, despite minor setbacks, this could be built and operated for less than $1 million annually.

Health insurance exchanges are not a bad idea, but Oklahoma should not be using federal dollars to implement such an exchange − particularly when the state could build an exchange for far less with no federal strings attached.

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