ObamaCare by the Back Door?


In March, Governor Nikki Haley publicly stated that “as long as [she is] the governor of South Carolina, we will not expand Medicaid on President Obama’s watch.” Also in March, House Speaker Bobby Harrell lauded the House budget vote against outright expansion: “we knew the HHS section of the budget is where ObamaCare supporters would make the strongest push to opt-in,” he claimed, “and we stood strong against this multi-billion dollar expansion.”

Yet that same month the governor and Speaker threw their support behind a House GOP proposal – promoted as an “alternative” to ObamaCare – that mirrored some aspects of ObamaCare itself. The proposal, ultimately adopted by the House in this year’s General Appropriations Act, would reimburse select rural hospitals 100 percent of their uncompensated care costs – money these hospitals would have received through Medicaid expansion. The plan, which totals $83 million, would depend on $21 million from the federal government.

Fast forward to the end of April and elected officials are giving even more mixed signals.

Did South Carolina nullify ObamaCare?

The coalescing of one of the strongest and most unified grassroots movement in the country – the movement to nullify ObamaCare – led to the filing of H.3101, sponsored by Rep. Bill Chumley. The bill, as filed, would have declared the federal health care law null and void, imposed criminal penalties on agents of the state who tried to enforce the law, and would have provided individuals harmed by the law with civil remedies.

In subcommittee, however, the bill was significantly weakened. The bill that passed out of subcommittee did not nullify ObamaCare, did not criminalize the enforcement of ObamaCare at the state level, did not provide individuals with any civil remedy, and in one move took any authority the executive branch had to stop ObamaCare. That power it gave exclusively to the legislature.

The bill was further amended in full committee, and even further amended on the House floor the day the bill was given its initial approval.

House lawmakers passed a bill that:

  • Declares that “the General Assembly of South Carolina has the absolute and sovereign authority to interpose and refuse to enforce the provisions of the Patient Protection and Affordable Care Act of 2010 that exceed the authority of the Congress.”1 A literal reading of that would conclude that what little authority the executive branch had to stop any implementation of ObamaCare is now in the hands of the legislature.
  • Does not declare ObamaCare illegal and unconstitutional. Rather, the bill declares that it is the “stated policy of the South Carolina General Assembly that provisions of the Patient Protection and Affordable Care Act of 2010 grossly exceed the powers delegated to the federal government in the Constitution.”2 The key word is “provisions.” The bill doesn’t say which provisions exceed the authority of Congress, and so effectively leaves the legal status of the federal health care law unchallenged and untouched. And gone is any mention of ObamaCare itself being illegal or unconstitutional.
  • Does not give individual citizens the opportunity for civil remedy if they are harmed by Obamacare. The state Attorney General is only authorized to bring action against a party in the name of the state, and it would have to be in the public interest – leaving individuals with no recourse.3

Not only did House Republicans claim to pass a bill “nullifying” ObamaCare while actually doing nothing of the kind. They may have made it much more likely that the state would participate in it.

Medicaid expansion still a possibility

On the day after final approval of H.3101 in the House, more than 70 representatives co-sponsored a bi-partisan proposal that would opt the state into the major provision of ObamaCare – Medicaid expansion. H.4095 goes even further towards compliance with ObamaCare than the alternative passed by the House in March.

The bill would establish the “Responsible Consumer Healthcare Program” funded by the acceptance of federal Medicaid expansion dollars for the first three years of the Medicaid expansion initiative, and running for that same duration.

There is created within the Department of Health and Human Services the Responsible Consumer Health Care Program for eligible individuals to receive health care services from January 1, 2014, through December 31, 2016, through Medicaid expansion funds provided to the State pursuant to the Patient Protection and Affordable Care Act, Public Law 111-148 of 2010.

The program would seek to enroll individuals with incomes under 138 percent of the poverty level (and who aren’t enrolled in Medicaid or Medicare) in a managed care program that would provide up to $500 in coverage for select preventative medical services. The bill would also require that individuals enrolled in a managed care program establish and make payments to a medical spending account.4

This bill has been framed as (another) “alternative” to Medicaid expansion. Despite some differences in the use of funding, however, the state will still be taking billions of dollars’ worth of federal funds associated with Medicaid expansion, a central point of contention on the issue. In fact, if at any point during the course of the “three year” Responsible Consumer Health Care program the state doesn’t receive 100 percent of the funds from the federal government, the program “shall terminate within one hundred twenty days.”5

The reason this bill only establishes the program for three years is that after three years, states must begin to finance 10 percent of Medicaid expansion themselves. This bill’s supposed purpose is to avoid putting the financial strain of Medicaid expansion (we’ve documented that elsewhere) on South Carolina taxpayers, but it’s extremely hard to imagine a new entitlement program simply going away after three years. After three years, the state would have to start footing the bill for this expensive new program. This would mean an additional $1.5 billion in additional state spending and $17 billion in federal spending through 2022.

South Carolina will have to request a federal waiver to use Medicaid expansion funds in the way envisioned by H.4095. When states get federal money for anything, the money comes with strings attached – meaning that states have to spend the money in ways prescribed by federal officials. The idea that federal officials would allow Medicaid money to be used in this way is far from certain.

Opting in to an ObamaCare Exchange?

While H.4095 doesn’t explicitly opt the state into the ObamaCare state healthcare exchange, it definitely makes an exchange a possibility. The bill, which establishes the Responsible Consumer Healthcare Program, would require participants in this new program (individuals 18 or older, not currently on Medicaid or Medicare, and below 138 percent of the federal poverty level) to enroll in a managed care plan available through the Department of Health and Human Services (DHHS).6

The question becomes: Does a managed care plan meet the criteria to be part of the state exchange?

The Affordable Care Act (ObamaCare) stipulates two types of federal requirements for exchanges: one, the minimum functions exchanges must undertake; and two, oversight responsibilities exchanges must exercise in certifying and monitoring the performance of Qualified Health Plans.

  • A “health plan,” as defined by the Affordable Care Act, is “health insurance coverage and a group health plan.”
  • “Health insurance coverage” is defined as “benefits consisting of medical care (provided directly, through insurance or reimbursement, or otherwise and including items and services paid for as medical care) under any hospital or medical service policy or certificate, hospital or medical service plan contract, or health maintenance organization contract offered by a health insurance issuer.”
  • A “health insurance issuer” is then defined as “an insurance company, insurance service or insurance organization (including a health maintenance organization) which is licensed to engage in the business of insurance in a state.”
  • The U.S. National Library of Medicine defines a health maintenance organization as a type of managed care program. And this brings us back to H.4095, which requires participants in the program to “enroll in a managed care plan” available through DHHS.

It certainly looks as though the managed care program established through H.4095 may be considered a “qualified health plan” under the ObamaCare state healthcare exchange – participation in which H.3101 prohibits.7

As a practical matter, in order for the Affordable Care Act to function, states would have to participate in exchanges and expand Medicaid. Otherwise it would become completely unworkable, beyond the capacity of the federal government to make it work. While other criteria must be met for a program to be classified as an exchange, H.4095 is vague enough to make participation in an exchange a possibility. Indeed, its passage may even make South Carolina automatically eligible to opt in to the exchange program through simple new amendments or additional laws.

For all the talk by elected officials of “standing strong against ObamaCare,” South Carolina appears to be well on the way to full participation in the federal health care law’s major provisions.

4. Section 44-6-1110, § (A) of H.4095

5. Section 44-6-1220, § (B) of H.4095

6. Section 44-6-1110, § (C) of H.4095

7. Section 5, § Section 38-71-44, § (A) of H.3101  

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