The Obama Administration is putting heavy pressure on state officials to establish state-funded “exchanges,” to help implement the Individual Mandate. As we’ve noted, “exchanges” is a misnomer, since these are not anything like markets, but are places where government-favored insurers can offer only government-approved one-size-fits-all health insurance plans to citizens who are essentially forced to buy. States are not required to establish these exchanges–and contrary to the Obama Administration’s claims, there is no “deadline” for doing so. The much-vaunted November deadline is only for states that wish to help the Administration in 2013. States are still free to wait and decide later. So it’s not “nullification” or anything if a state chooses not to join now.
If a state declines to set up an exchange, the federal government will set up its own. Sadly, this has misled some state officials into thinking that state-funded exchanges promote federalism and local control. In fact, the opposite is true. The feds will still dictate how state exchanges operate, but state collaboration would impose heavy tax burdens on the state’s business owners which would not exist under federal operation. And insurance companies get a host of subsidies if the state collaborates with the feds, which don’t come with a federally-run exchange.
South Carolina governor Nikki Haley has announced that her state won’t join. The voters of Missouri also passed an initiative opposing spending the state’s money on these unnecessary and costly programs. New Hampshire, Texas, Florida, and other states have also said no. (California, of course, was first to throw itself under the yoke.)
This is a prime example of how federalism can help to protect Americans against federal overreaching. But it’s also evidence of a phenomenon Michael Greve writes about in his new book: the tendency of many state officials to give in to federal pressure and waive the strongest protection state citizens have against the overreaching of Washington bureaucrats.