Repeal of health care could short circuit California's health insurance exchange

Rep. Michele Bachmann (R-Minn.) speaks at a news conference on Jan. 18, 2011 in Washington, DC., where Republican members of the House displayed petitions Americans have signed demanding the repeal of healthcare legislation.
Rep. Michele Bachmann (R-Minn.) speaks at a news conference on Jan. 18, 2011 in Washington, DC., where Republican members of the House displayed petitions Americans have signed demanding the repeal of healthcare legislation. Win McNamee/Getty Images

Congress has begun to debate whether to repeal the federal health care reform law. The US House of Representatives expects to vote on the matter this week. But what effect would the repeal have on California’s efforts to start its own health insurance exchange?

One important part of the health care reform law is a provision that allows states to create health insurance exchanges – a cafeteria of plans at different price points and benefit levels available to people who don’t have insurance - or who don’t like the insurance they do have.

In a speech to the American Medical Association two years ago, President Obama described it this way: "This exchange will allow you to one-stop shop for a health care plan, compare benefits and prices, and choose a plan that’s best for you and your family."

California was the first state in the nation that passed legislation to create a health insurance exchange. Even amid a budget crisis, the state set aside $1 million to hire staff. The exchange is already at work on neighborhood outreach and grant proposals.

But what if Congress repeals the health care law that created the health insurance exchange?

On the floor of the House, Republican Rep. Dan Lungren of northern California questioned the constitutionality – and economic logic - of requiring every American to purchase medical insurance.

"If government has the power to require that you buy item A, it means that you are less able to buy item B, C, D or anything else," he says. "Now, economists would call this the opportunity cost of foregone goods or services. But the fundamental question is the freedom to choose how we as individuals will spend the fruits of our labor."

Democrat Henry Waxman, the ranking member of the House Energy and Commerce Committee, says the requirement of coverage for all makes insurance affordable. If Congress repealed health care reform, California could still set up an exchange and even pass a law that requires insurance companies to cover everybody. But the Congressman from West LA says it wouldn’t work.

"If California mandated insurance companies to take people with pre-existing conditions and there was not at the same time a requirement that everybody be covered, insurance companies have a very valid argument: people would just as soon wait until they got sick, then go and buy a policy, if they know they can buy that policy without being told “no” and without being told you have to pay more for it."

Waxman says that in order to survive, insurers would have to charge a lot more for every policy they sell. He adds that the tax credit in the health care reform law that helps people afford insurance would also disappear if Congress repeals the measure.

Repeal could deal a big financial hit to the golden state. Daniel Zingale is vice president of the California Endowment, a grantmaker for health care issues. He says tens of billions of dollars are at stake for California.

"We’re now counting on the support that the new federal Affordable Care Act offers us so that we can start to create incentives for prevention, keep more people healthier, and get about the business of bringing down the cost in the long term, but we do need some help to make those investments on the front end."

The debate continues on the floor of the House of Representatives with a vote expected Wednesday night.

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