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Health Exchange Bill Gains Ground in Idaho

BOISE, Idaho (CN) - The Idaho Senate approved Gov. Butch Otter's bill creating a state-run health insurance exchange, sending the legislative session's defining issue to the state House.

The Friday vote on Senate Bill 1042 came as a surprise to those who expected heavily Republican Idaho to follow Oklahoma's example and fight to the end over President Obama's health care mandate.

The bill, however, passed by a 23-12 vote after a six-hour debate. But Idaho senators cited concerns that have plagued them ever since the U.S. Supreme Court ruled that the federal government has the right to tax people and businesses that do not comply with the federal health care mandate.

Otter's bill provides the architecture for a state-run exchange under the Patient Protection and Affordable Care Act, aka Obamacare, enacted by Congress in March 2010, and upheld by a 5-4 vote of the Supreme Court before the November 2012 election.

States have until January 2014 to implement the federal plan or their own health exchange. Some states are scrambling to write their own plan, some debating whether to default to a federally run exchange, and others whether to do either one.

In Boise, members of the Senate Commerce and Human Resources Committee fielded public comments on Feb. 5 and 7. Some senators were visibly conflicted by their vote for a state exchange. But they apparently feared the consequences of failing to comply with the federal law.

"I deeply despise Obamacare," said state Sen. Todd Lakey, R-Nampa.

"I'm frustrated with the position we are in and that the rules keep changing, but I also feel I have a responsibility to Idaho."

Other senators agreed that a state-run program would give Idaho some control over the exchange.

The Senate committee consists of 7 Republicans and just 2 Democrats, including Sen. Branden Durst, D-Boise, who was the dissenting vote in the committee's 8-1 vote to send the legislation to the full Senate with a "do pass" recommendation.

In addition to concerns about intrusions on state sovereignty, another key hurdle for Idaho politicians is that the state exchange would be run by an independent board, and not subject to legislative oversight.

"Just so that we have this straight: there will be no legislative oversight with a state exchange?" Sen. Durst asked Otter's Chief of Staff David Hensley at the Feb. 7 committee hearing.

"You will have a say as it is being created, but after that, no, no there will not," Hensley said.

Idaho Republican Party Chairman Barry Peterson said in a statement before the Feb. 5 hearing: "Remember, the Idaho State Legislature passed the 'Idaho Health Care Freedom Act' in 2010, opposing any and all Obama health care programs. We wholeheartedly accept and support that law. If Idaho's Republican lawmakers decide to embrace Obamacare, Idaho will be making it difficult for other states to continue their resistance."

Hensley said at the conclusion of the hearing that he had been told by the Idaho Attorney General's office that a state health exchange would not violate the Idaho Health Freedom Act of 2010.

In the Idaho House

On Feb. 13 lawmakers in Idaho's lower house unveiled H.B. 179, responding to the lack of legislative oversight of the state exchange. H.B. is a companion bill to what opponents call "Ottercare," S.B. 1042.

House Bill 179 would put two lawmakers on the exchange's 18-member governing board, as nonvoting members.


Legislative review would be needed for fee increases and open bidding would be required on all contracts.

House Bill 179 aims to make sure that costs associated with the exchange's operation are paid for under the Affordable Care Act.

Finally, H.B. 179 would require board meetings to be televised and would allow the state to withdraw from the exchange.

House Bill 179, crafted by a bloc of 16 freshman lawmakers, is intended to soften concerns about legislative oversight and is expected to help ease final passage of S.B. 1042.

Are There Alternatives?

Most Idaho lawmakers oppose Obamacare, but say there is no choice in the matter.

Otter said in January that he "hates" Obamacare, and repeated the sentiment during an Idaho Press Club event Feb. 8.

He said Idaho had little choice but to create its own exchange, based on a report by an Idaho task force charged with researching Idaho's options.

Otter said he is tasked with "looking out for Idaho's best interest."

"You all know how I feel about Obamacare," he said in his annual State of the State address on Jan. 7.

"I will continue to encourage and support efforts by our Idaho congressional delegation and many others to repeal and replace the law. But the fact remains that for now, and the foreseeable future, it is the law. And as responsible elected officials, we are sworn to uphold the rule of law, not just those that we support. So I urge you to look beyond the important work of changing misguided federal law, to the essential task at hand, for those of us in the chamber today, preserving for Idaho citizens the option of having a voice in one element of the law as it is implemented."

Other Idahoans agree that some control is better than none.

"Given the nature of the choice we are faced with, it is important for us to establish a set of facts we can all agree on," said Peggy Munson, testifying on behalf of the AARP at the Feb. 7 committee hearing.

"Most of the conversation has been centered on 'just say no' or 'let's delay our decision.' These are not choices we have," Munson said. "Make no mistake, whether Idaho chooses either a state-based health exchange or defaults to a federal exchange, the fact of the matter is there will be a health exchange in Idaho whether we like it or not."

Idaho joined 13 other states in a lawsuit challenging the Affordable Care Act the day it was passed in 2010.

The U.S. Supreme Court upheld the act's constitutionality on June 28, 2012 in National Federation of Independent Business, et al. v. Sebelius, et al.

Constitutional or Not?

Some opponents still claim that the Supreme Court ruling has been misunderstood: that the court affirmed only that the government can tax people and businesses that do not comply with the mandate to get health insurance, but did not rule on the process by which the enforcement is implemented.

Under the Affordable Care Act, all states must create an exchange by January 2014, or the federal government will create one for them.


Where things get jumbled is whether the IRS may levy taxes on people and businesses that do not comply with the Obamacare mandate, when the state decides not to create a state exchange. The government is offering subsidies and tax incentives to states that do.

Opponents say a state's refusal of an exchange is key because the state cannot be taxed for a government program it does not accept. The Supreme Court said the government can tax for noncompliance with the mandate, but less clear in regard to a state's refusal of government programs.

Oklahoma is suing the federal government over that very issue, claiming that only a state exchange can enforce tax penalties, which the IRS calls the "shared responsibility payment." If there is no state exchange, Oklahoma claims, the government cannot enforce the tax on anyone in the state.

A handful of Idaho exchange opponents claim that the only way the federal government can enforce the mandate is if states accept the creation of a state exchange.

"If we say no to a state exchange, the federal exchange cannot enforce tax mandates on businesses and citizens," Boise State University adjunct professor of economics Steve Ackerman said at the Senate committee hearing.

"The Supreme Court was clear: Congress may tax people who don't buy qualified health plans. However, the court did not define the process for how that has to happen. To look for the process, you must go back to the law, and the Affordable Care Act is clear: Only a state exchange can enforce the tax subsidies, tax credits and, yes, the tax penalties," Ackerman said.

Ackerman claims that a state must agree to a state-run exchange before federal enforcement can be activated. He and others claim that S.B. 1042 will unleash the federal government's ability to impose taxes on Idaho's businesses and citizens, bringing the "tax camel's head into the tent."

Idahoans, especially health insurance professionals, want to avoid a federal exchange, because it means lack of control, according to lawmakers, citizens and insurance industry professionals who spoke at the committee hearing.

Ackerman claims that the federal government will control the exchanges - state or federal - where it counts: over benefits, coverage levels, and premiums.

"The Affordable Care Act is going to leave insurance companies scrambling to ensure their futures either way," Ackerman said in a post-hearing interview.

"They may see the state exchange as choosing the lesser of two evils, but the state exchange brings operational costs, the tax regime problem, and the same federal rules regardless."

Ackerman added: "Control over the governance doesn't really matter when federal rules control the buying and selling of insurance - the true operations or the guts of the exchange. This is the reason 25 states have chosen not to go ahead with the exchange, and I know they are not concerned over their sovereignty in doing that. The first problem is that the exchange is not a made-in-Idaho solution. The benefits offered, the coverage levels that are set and the rating system that helps determine the premiums are all based on federal rules."

Ackerman said that under Section 1311 of the Affordable Care Act, "a state exchange may not establish rules that conflict with or prevent the application of regulations promulgated by the secretary of Health and Human Services."

"Notice that a state legislature cannot override a federal regulatory agency in this case," Ackerman said. "So I believe there is a loss of power in the Legislature. With something as important as health care, and with questions over costs and fees for a possible state function, the elected legislature should be heavily involved."

Yet S.B. 1042 seems headed for final approval. And though its companion bill, H.B. 179, claims to offer more legislative oversight, it will be through just two nonvoting members on what would be and expanded, 20-member board.

Opponents say there is no sense in moving forward when so many details are still unknown.

"I think we should wait until we know what we are getting ourselves into," Durst said.

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