SC’s Health Planning Committee Recommends Against a State Exchange

In recent months, the South Carolina Health Planning Committee has seen presentations by industry experts, academics, lawyers, consultants, and insurance companies on the state’s health insurance market. Its charge? To make policy recommendations regarding the establishment of a health insurance exchange in South Carolina, as outlined within the Patient Protection and Affordable Care Act (ACA). On November 30th, the Health Planning Committee submitted its report to the Governor, which recommended that South Carolina refrain from setting up a state exchange.

The report contains 22 recommendations, nine of which are requests for legislative or executive reviews of possible changes to the current South Carolina health care system. The remaining 13 recommendations center around the four major issues with health care exchanges, which we’ve highlighted in our coverage of the Health Planning Committee and research on ACA over the past few months.


1) There is no difference between a state or federally run health exchange.

While federal regulators tout state exchanges as “flexible,” no opt-out clause exists in ACA for any of the competition-crippling market reforms that will take full effect in 2014, making the question of which entity “runs” the exchange almost completely insignificant. According to a legal analysis requested by the Committee, “because the federal requirements are quite extensive and prescriptive, the flexibility accorded to State Health Insurance Exchanges, while still important, is fairly constrained.” The analysis further states that “it is not clear the extent to which the decisions made by the State will be subject to federal oversight and/or negotiation.”

South Carolina stands very little to gain by assisting the federal government in handing out taxpayer-funded subsidies for the purchase of health insurance on the individual market, while neglecting necessary state reforms. If the only thing that the state can expect in return for taking on the federal government’s political priorities is a “flexibility” that provides no guarantee of state authority over health policy, then there’s little reason to tie up state resources in doing so.


2) The exchanges proposed by ACA go well beyond the original conceptualizations of exchanges as “marketplaces.”

Health exchanges are typically portrayed as consumer-oriented, competition-inducing marketplaces in which individuals can comparison shop for health insurance plans. The exchanges proposed under ACA regulations, however, are primarily subsidy delivery systems, secondarily new regulatory agencies, and only distantly involved in solving health care’s critical problems: high, exponentially increasing costs and lack of consumer knowledge. SCDHHS Director Tony Keck’s analysis points out that state health exchanges are required to certify plans as eligible to be sold on the exchange, and perform enrollment, eligibility, and premium collection. In addition, ACA requires state-based exchanges to determine Medicaid eligibility as well as federal premium subsidies for individuals and families making between 138 and 400 percent of the federal poverty level: a massive administrative burden well outside the realm of comparison shopping.

Information on health insurance policies should be clear, public, and easy to understand. It’s unclear, however, how the state can efficiently be involved in this process. The private market has made a great deal of progress in increasing consumer information systems in the past few years, and many healthcare providers and insurance companies offer web portals for their products that do everything a “marketplace” style exchange would do without dipping into government coffers. Director Keck thusly recommends that “the state … encourage the establishment and expansion of private exchanges designed to serve the needs of a variety of consumers.”


3) Exchanges do little to nothing to address the critical issue of lowering the cost of health care.

The claims of exchange supporters rest on a single, completely unproven assumption: that health exchanges will increase competition among health insurers. Unfortunately, ACA’s individual mandate, paired with the new risk adjustment model of its reforms, forces insurance companies onto a single, precarious risk model that actively harms competition. As a representative from United Healthcare warned in a recent meeting, this risk model will only work if “young invincibles” (or low-risk, low-cost) premium enrollees are forced by the government to purchase insurance they don’t need – at a far higher cost than it takes to cover them – in order to cover care for higher-cost, higher-risk plan enrollees. Essentially, ACA changes the entire health insurance market into yet another endless, involuntary redistribution program from young to old, hidden in the guise of a “reform.”

Other attempted state exchanges actually raised the cost of healthcare premiums in their states. The Massachusetts Health Connector (or “Romneycare”) caused both higher premiums and job losses in the state, according to a report by the Beacon Hill Institute. There is little reason to expect that a South Carolina health exchange would have any other outcome.


4) South Carolina can and should improve upon its existing health care system.

As the committee report states, “the health issues in South Carolina are specific to the state and its communities. It is therefore imperative that the solution be local as well.” Significant problems exist in the South Carolina health care market, but ACA addresses few of them. The Committee has done valuable work in articulating the state’s health reform goals and priorities: to improve health outcomes and availability in the state. This can be done much more efficiently at the state level by encouraging competition with market reforms, fostering local community health programs, and implementing means of controlling healthcare costs in the government-run healthcare programs.


As we’ve suggested in the past, the Health Planning Committee has recommended South Carolina refrain from setting up a state exchange for now. In the coming year, let’s hope that the Governor and Legislature continue to expend their energies actually addressing South Carolina’s health care woes, instead of diverting scarce healthcare resources to ill-defined federal political priorities.

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One Comment on “SC’s Health Planning Committee Recommends Against a State Exchange”

  1. It is imperative, at some point, that the sane people in this country quit pretending that the Left doesn’t understand this issue of costs. The Left understands the issues of costs.

    It’s funny how conservatives continue to argue with the Left from the standpoint that we share common values about the free markets and individual liberty and self-determination. We don’t share these values at all. So, why should we wait fo a crisis to develop and spin out of control that leads to a second civil war in this country? In that case, only the stupid and self-serving people will be heard on both sides. And the voice of the majority will become irrelevant.

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