Americans for Prosperity (AFP) is a free market non-profit organization that is committed to educating and engaging grassroots citizen activists across the country to advocate for smaller government, lower taxes, and free enterprise.  We believe that the free market is and always has been the true path to prosperity. On behalf of our almost 67,000 activists in Michigan, I am pleased to submit this written testimony opposing any attempt by the State of Michigan to create a “Health Exchange” as dictated by the Patient Protection and Affordable Care Act (PPACA).

Exchanges in their most basic form are a simple market mechanism allowing consumers to research, understand, and satisfy their health care needs.  However, the Exchanges–as drafted within PPACA and substantiated by the Proposed Rules released in the Federal Register on July 15, 2011–are blunt instruments restricting consumer choice and limiting state flexibility.

The Proposed Rules from the Department of Health and Human Services (the Agency) try to provide the impression of state flexibility, while the Agency retains all important decisions regarding the Exchange and its processes.  The Agency must provide initial approval of any Exchange, thus requiring compliance with standards and guidelines the Agency sets outside of Michigan’s control.  Secondly, the Agency establishes a “significant change” test that removes any discretionary power from the State to make changes as needed.  “Significant changes” include such items as: Exchange governance structure, state laws and regulations and IT systems or functionality.   The Agency gives States discretion regarding the Exchanges but only within the tight approval and operational paradigm laid out by the Agency.  Even Michigan’s best attempts to create a consumer-focused exchange will be thwarted by the Agency leaving Michigan as an administrator of policies formulated two thousand miles away.

Further, AFP objects to Agency attempts to create a centralized claims database.  The aggregation of personal health data carries inherent security and privacy risks.  The Agency also suggests that the use of this data will extend beyond the stated purposes of risk adjustment leaving the door open to “other uses,” creating accountability, security, and transparency issues.

Finally, implementation of a state based healthcare exchange will raise taxes on businesses in Michigan. If a business does not provide “affordable” coverage to an employee, the employee can then purchase insurance through an Exchange and becomes eligible for federal tax subsidies.  The employer is then subject to a $3,000 fine for each employee that’s eligible for the subsidy.  However, because lawmakers didn’t even read the bill before they passed it, only individuals purchasing from a state-created Exchange are eligible for a tax credit; federal Exchanges are not eligible.  Therefore, setting up a state-based Exchange will subject businesses in Michigan to higher taxes.

AFP opposes any attempt by Michigan to create its own Exchange and instead urges the State to reject the Federal government’s attempt to make important decisions on behalf of Michigan and her citizens.

For a thorough explanation of AFP’s position on Exchange regulations, click here.

Sincerely,

Scott Hagerstrom

State Director

Americans for Prosperity – Michigan