FRANKFORT — As the chairman of the Senate Banking and Insurance Committee, I have dedicated my professional life to understanding how insurance can best protect people from events that they may not be fully prepared for.
What to do with exchanges is a policy decision that public officials will have to address, especially in the wake of the U.S. Supreme Court decision upholding most of the Patient Protection and Affordable Care Act. States are being pressured to establish federally regulated and approved health insurance exchanges by 2014.
If a state opts not to create its own exchange, the federal government will implement one for you. To date, only 15 states have begun the process of establishing an exchange. Kentucky should use extreme caution also for the same reasons that many other states have resisted moving forward:
The final exchange rules do not explain all the necessary requirements. With incomplete information, states that move forward with implementing an exchange risk investing valuable time and taxpayer dollars only to discover their exchange does not comply with federal regulations.
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The threat of a federally run exchange is a red herring: The health care law does not provide the federal government with adequate funding to set up or operate federal health insurance exchanges.
No matter the type of exchange, states will not have full authority over their own health care exchanges anyway, according to language within the law.
Implementing an exchange will result in high administrative and operational costs, and those costs will rise soon after initial implementation. Federal funding for exchanges is expected to run out by 2014, making state spending increases inevitable.
As the federal government continues to take control over health care from the states while cutting funding, state officials should be extremely careful and resist setting up health insurance exchanges because these exchanges must be approved by the secretary of the U.S. Department of Health and Human Services. Several states already have sent exchange models to Washington, only to have them rejected.
Keep in mind, there is no such thing as a state exchange under the health care law. Financial assistance from the federal government will end by 2014, forcing states to look for ways to compensate, thus increasing state spending.
It will require fees set on insurance companies that translate to premium increases. The insurance companies will have to pass this on to the consumer. Millions of hard-working Americans are likely to be dropped from their existing health insurance plans and forced into flawed bureaucratic exchanges.
Only two state exchanges are now in operation in the United States: Utah's and the Massachusetts Commonwealth Connector. Both have failed to produce low-cost or consumer-driven health care. Massachusetts spent more than $29.4 million in 2009 alone on the Commonwealth Connector, not including the high administrative costs. Health insurance in Utah is more expensive inside the exchange than on the market.
This is why in the Capital Projects Committee, I voted not to authorize funds for expensive office space for the governor's health insurance exchange, and in the Health and Welfare Committee, I argued for rejecting the governor's executive order implementing such.
To pay for office space, hire consultants, and expand the size of government at taxpayer expense without having a concrete plan in place showing how Kentucky will benefit is simply incompatible with my way of thinking.