Independent Study: ObamaCare Health Insurance Exchanges Get a Grade of 'F'

The independent Mercatus Center at George Mason University has given a grade of “F” to the ObamaCare Health Insurance Exchanges regulation. The center studies the anticipated results and economic effects of proposed regulations. In other words, their researchers evaluate whether regulations are likely to accomplish what their supporters say they will.

The Mercatus center delivered its “Regulatory Report Card” on the Health Insurance Exchanges, the set of rules that states will use to set up online health insurance marketplaces. These virtual marketplaces will allow individuals and small employers to compare available private health insurance options on the basis of price, quality, and other factors. The Exchanges, which are scheduled to be in effect by January 1, 2014, are, next to the individual mandate upon which ObamaCare is based, crucial to the law’s ability to achieve its stated goal of expanding access to health insurance to the currently uninsured. Ultimately, they will be used to distribute $460 billion in federal health subsidies, through the year 2019.

The Health Insurance Exchanges regulation received only 42% of potential points (25 out of 60) on the Mercatus “Report Card.” The score of 25 points is the second lowest score the Mercatus Center has issued for 2011 regulations. The Exchanges were measured according to 12 criteria covering three broad categories: Openness, Analysis and Use. For each criterion, the researchers assign a score ranging from 0 to 5, with “5” being the highest score on any given criterion. Some of the highlights are below:

In the Openness category, ObamaCare’s Exchanges received the lowest score of “2” on the ease with which someone could find the regulation online. Verifiability of the assumptions used in the regulation’s analysis and the data used to support it were both given scores of “3,” with comments that the regulation relies heavily upon analyses performed by agencies such as the Congressional Budget Office (CBO). The regulation received a score of “4” on its ability to be understood by an informed layperson. Interestingly, the researchers comment that the Health Insurance Exchanges regulation is “light reading” for someone who is “informed,” but due, in part, to the fact that there is little detail provided. However, as we have come to discover in ObamaCare, the devil is, indeed, in the details.

In the category of Analysis, the regulation received an overall score of “3” on the criterion measuring how well the analysis behind the rule identifies desired outcomes and demonstrates that the regulation will, in fact, achieve them. HIgh and low points: a score of “5” for the criterion reflecting whether the regulation’s analysis clearly identified outcomes that affect citizens’ quality of life, i.e., the intention to improve public health, to improve financial security of citizens, etc., but a score of “2,” for the criterion which measures whether the regulation’s analysis presents “credible empirical support for the theory” behind it. The study highlights that, in writing the rule for the Exchanges, the Department of Health and Human Services (DHHS) based evidence for its anticipated success on evaluation of an expansion of a 2008 Medicaid program, through a lottery, in Oregon, and a 2002 Institute of Medicine report that found that having health insurance improves health outcomes. Are we surprised that a far-reaching law like ObamaCare is based on two dinky studies?

On the criterion of how well the Exchanges rule analysis assesses the effectiveness of alternative approaches to addressing the needs of the uninsured, the overall score was “2,” with a subscore of “1” given for the issue of whether the regulation addresses other methods, besides federal intervention, to fix the same problem. In other words, tort reform, competition among insurance companies across state lines, and other free market solutions were not even considered. No surprise again.

The ObamaCare Exchanges received an overall score of “2” on the criterion of how well the regulation’s analysis assessed costs and benefits, with a “0” given for the regulation’s ability to identify the cost-effectiveness of alternatives presented.

In the Use category, the regulation fared extremely poorly, with a “0” score given for DHHS’s failure to indicate which data it will use to evaluate the regulation’s performance in the future. As we have come to discover with ObamaCare, DHHS will likely not evaluate whether the Health Insurance Exchanges work.

According to The Washington Post, about a third of the states have not progressed in setting up ObamaCare’s state-based health exchanges. Several states- Florida, Louisiana, and Kansas- have decided not to set up the exchanges at all, an interesting dilemma for the Obama administration. As points out, if a state does not participate in ObamaCare, the federal government will have to move in and set it up, a situation which will give further credibility to the notion that the federal government is taking over healthcare.

Two other sticky problems with the exchanges: first, the federal government has no funds set aside to set up the health insurance exchanges in the states. Second, ObamaCare allows insurance subsidies to be given to those who purchase insurance through the “state-run” exchanges, so those in states that oppose ObamaCare will end up with the requirement to purchase health insurance, but no subsidies from the federal government.

Finally, the Mercatus Center evaluators note that the ObamaCare Health Insurance Exchanges rule expends “no effort to determine who ultimately bears burdens (taxpayers, consumers or producers). The implicit assumption appears to be that all citizens gain (lower insurance premiums, better public health), but this is never directly stated.”

Of course, we now know that the “assumption” is nothing more than a fantasy. Last summer, Medicare actuary Richard Foster told us the truth about ObamaCare: the president’s signature legislation will triple the growth rate of net insurance costs. That’s an “F” in any book.