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Sally Pipes: Obama faces a second crucial November hurdle

Posted 11/13/12

All eyes were on election day, but the true make-or-break moment of President Barack Obama’s political career – regardless of his successful re-election campaign – hasn’t come yet.

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Sally Pipes: Obama faces a second crucial November hurdle

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Nov. 16 is the deadline for states to submit a blueprint to the federal government for Obamacare’s insurance exchanges – a key component of the new healthcare law.

Already, the exchange system is proving to be an unmitigated disaster.

No one should be surprised by this. Like so much of the president’s gargantuan healthcare entitlement, the exchanges are burdened by a spider’s web of confusing regulations, poor design and a top-down, command-and-control structure.

These exchanges were conceived as state-based insurance marketplaces. They were intended to reduce costs and increase access by streamlining the process of buying coverage. States would customize their exchanges to meet specific local needs. They could experiment. And individual consumers and small businesses would have an easy avenue to get coverage.

It seemed to be a rare instance of liberal lawmakers taking Justice Louis Brandeis’ advice to use states as “laboratories of democracy.” In practice, however, nothing could be further from the truth.

For starters, each state’s base plan must abide by federal mandates regarding application requirements, income verification and appeals processes. Regulations released earlier this year by the Department of Health and Human Services state the situation plainly: “The Affordable Care Act does not contemplate divided authority over an Exchange.”

In other words, it’s the fed’s way or the highway. If a state refuses to start up an exchange, the federal government steps in and forcibly establishes one for them.

So much for experimentation.

But it gets worse. Even now, state governments have no idea what standards or rules they will actually have to abide by. With the deadline quickly approaching, the federal government still hasn’t even spelled out the so-called “Essential Health Benefits” – that is, the set of minimum benefits every plan on the exchange has to offer. (Then again, what do you expect from a government that hasn’t even passed a budget in three years?).

As Pennsylvania State Insurance Commissioner Michael Consedine recently explained before Congress, “Continuing without answers to these crucial issues is like driving down a winding road, at night, without any headlights – nothing good will come of it.”

But even if the government had done its job and spelled out the rules, the exchanges would still be a raw deal for the states.

To date, only 15 states plus Washington, D.C. have declared their intention to set up insurance exchanges. The rest are holding back, upset with the costs associated with running them.

States have to bare the expenses of staffing these exchanges and financing development of needed technologies, like website registration systems. Many worry that these costs will deplete funds for more immediate needs, like education and transportation.

Like Obamacare itself, the exchange system is plagued by incompetent management, burdensome regulations and inept political calculations. Even now that the president managed to come out victorious on election day, November could still prove his undoing.

Sally C. Pipes is president and CEO of the Pacific Research Institute, a San Francisco-based think tank.