Pascal's Wager: Health Insurance Exchanges, Obamacare, and the Republican Dilemma

Abstract

Enactment of the Patient Protection and Affordable Care Act (ACA) created a dilemma for Republican policy makers at the state level. States could maximize control over decision making and avoid federal intervention by establishing their own health insurance exchanges. Yet GOP leaders feared that creating exchanges would entrench a law they intensely opposed and undermine legal challenges to the ACA. Republicans' calculations were further complicated by uncertainty over the Supreme Court's ruling on the ACA's constitutionality and the outcome of the November 2012 elections. In the first year of operation, only seventeen states and the District of Columbia chose to design and implement their own exchanges; another six partnered with the federal government, and twenty-seven states ceded control to Washington. Out of thirty states with Republican governors in 2013, only four launched their own exchange. Why did many Republican-led states that initially appeared open to establishing exchanges ultimately reverse course? Drawing on interviews with state policy makers and secondary data, we trace the evolution of Republican responses to the exchange dilemma during 2010-13. We explore how exchanges became controversial and explain why so few Republican-led states opted for their own exchange, focusing on the intensifying resistance to Obamacare amid a rightward shift in state politics, partisan polarization, and uncertainty over the ACA's fate.

Unraveling from Within? The Affordable Care Act and Self-Undermining Policy Feedbacks

“…ACA proponents underestimated state resistance to both exchanges, which had been an idea previously supported by many Republicans, and Medicaid expansion. After the 2010 elections and rise of the Tea Party, state politics moved to the right and GOP governors had a stronger incentive to boycott Obamacare and Medicaid expansion (Jones, Bradley, and Oberlander 2014). They have done so, despite, in the case of Medicaid, financial lures from the federal government: ideology and partisanship has trumped fiscal pragmatism in many states.…”

“…Many of the uninsured were to gain coverage through the state-administered Medicaid program. And states were given the opportunity to establish health insurance exchanges, purchasing pools where the uninsured and small business could go to obtain coverage (Jones, Bradley, and Oberlander 2014). Liberals had pressed for a national exchange, but Democrats' filibuster-proof majority of 60 in the Senate, which included Ben Nelson of Nebraska and others hostile to an expansionary federal role, made such a scheme impossible to pass; a Medicare-like public insurance option for the uninsured failed to clear the Senate for similar reasons.…”

“…Subsequent events, though, would underscore just how crucial the reliance on state implementation was (Jones, Bradley, and Oberlander 2014).…”

“…To be sure, there are real policy tradeoffs: limited networks allow plans to offer less expensive premiums. But the source of the limited coverage is the fiscal constraints faced and compromises made by the Obama administration and Congressional Democrats to pass the ACA (Oberlander 2014). A health reform plan with more money dedicated to its financing would have allowed for more generous plans, and perhaps such plans would generate a stronger political constituency of beneficiaries.…”

The Changing Landscape of Medicaid

“…3 Neither decision was part of the version of reform that President Obama preferred, which included a national exchange and mandatory Medicaid expansion.…”