Ohio Says No to an Obamacare Health Exchange
Fact Sheet

BACKGROUND: On March 23, 2010, President Barack Obama signed the Patient Protection and Affordable Care Act (ACA) which brings sweeping changes to America’s health care system. These include:

  • Individual Mandates: A requirement that every American have health care coverage or possibly face a tax penalty;
  • Employer Mandates and Penalties: New taxes and penalties on employers that don’t provide employees with specific types of health care coverage prescribed by the federal government;
  • Medicaid Changes: As originally enacted, program changes included mandatory expansion of coverage to those at or below 138 percent of the federal poverty level, but this was made optional for states by the U.S. Supreme Court’s June 28, 2012 decision in NATIONAL FEDERATION OF INDEPENDENT BUSINESS ET AL. v. SEBELIUS, SECRETARY OF HEALTH AND HUMAN SERVICES, ET AL.;
  • Health Exchanges: A health care exchange will be created in every state through which individuals earning between 100-400 percent of the federal poverty level can purchase subsidized health insurance. The federal government will pick the companies that can sell in the federal exchange and companies must sell virtually identical products and share profits and costs for a period of time. States can run the exchange themselves, choose not to run it and leave it to the federal government or leave it to the federal government while retaining the right to regulate health insurance and control eligibility decisions for their Medicaid programs.

OHIO WILL NOT RUN AN OBAMACARE HEALTH EXCHANGE: On Nov. 16, 2012 Gov. John Kasich notified the U.S. Department of Health and Human Services that Ohio will not run an Obamacare health exchange in Ohio, but will instead leave that to the federal government to do. This decision was made after thoroughly investigating all options available to Ohio under the law, including conducting separate studies by the respected health policy research specialists Milliman, Inc. and the global business and information technology consultancy KPMG. Ohio’s analysis concluded that:

  • States lack flexibility or control over exchanges: Despite the perception to the contrary, the law gives states little flexibility or control over how the exchange in their state operates, making it difficult for Ohio to set up an exchange that responds to the unique needs of Ohioans or the Ohio insurance market. States running exchanges must request permission and receive approval from the federal government for their initial plans, and almost every change must be approved by the federal government as well. Basic operational details are controlled by the federal government, including open enrollment periods, requirements on how to set up and run call centers and the exchange’s website.
  • Setting up and running exchanges are very expensive: It would cost as much as $63 million1 for Ohio to set up an exchange and as much as $43 million to run it every year2. While these costs could be covered by fees on individuals using the exchange to buy health insurance, they may actually be lower if Ohio leaves most exchange functions to the federal government—an estimated $21 million or less for start-up3 —and potentially less for annual operating costs as well. Little guidance from the federal government on the state’s role in this scenario have made cost-projecting difficult, however.
  • Inadequate information is available from the federal government: In addition to the significant costs and lack of flexibility in running an exchange, states have received little information or clarity from the federal government on key areas, which has complicated states’ ability to make decisions. Especially challenging has been that the federal government has yet to issue required rules that would explain to states:        
    • The benefits that must be offered by health plans sold on the exchange or in the market;
    • How the federal government will pay for the federal exchange; and
    • The requirements that multi-state plans must meet in order to be sold on the exchange.
  • An Obamacare health exchange will impact Ohio in a uniquely negative way: Ohio’s long-standing reputation under both Democrat and Republican administrations for maintaining a stable, well-regulated insurance market has attracted a large number of companies to the state, creating widespread competition and lower costs than in other states. The restrictions that Obamacare places on both exchange and non-exchange health insurance will undermine these long-time, hard-won advantages and increase costs and reduce choices for consumers.

OHIO WILL NOT LET THE FEDERAL GOVERNMENT TAKE OVER ANY REGULATORY CONTROL OF ITS INSURANCE INDUSTRY: Obamacare would allow the federal government to regulate health care insurance sold in Ohio through an exchange. Ohio has regulated insurance effectively for approximately 60 years and wants to retain this authority so it is saying not to give any of this authority to the federal government. Additional reasons for this decision include: 

  • Insurance is essential to Ohio’s economy. With 400,000 direct and indirect jobs created by the insurance industry, Ohio has the second-largest number of industry jobs of any state in the country. Preserving Ohio’s history of high-quality regulation helps maintain stability in the industry and preserves these jobs;
  • A federal takeover of health insurance regulation for an Obamacare health exchange is duplicative and burdensome. By retaining regulatory control of all health insurance, Ohio will ensure that health insurance companies will deal with a single regulator in Ohio—the Ohio Department of Insurance—not both the Department and the federal government. A single regulator is less costly and less confusing for companies and, ultimately, consumers.

OHIO WILL NOT LET THE FEDERAL GOVERNMENT TAKE OVER DECISION-MAKING ON MEDICAID ELIGIBILITY: Obamacare allows states to turn over to the federal government’s insurance exchange the job of deciding who can and cannot receive benefits from Medicaid programs; however, Ohio will not turn this power over to the federal exchange.

  • Preserving Ohio’s care quality improvements is important to low-income Ohioans: Ohio has worked very hard over the past two years to improve the quality of the care it provides to low-income Ohioans on Medicaid, with a special focus on helping vulnerable Ohioans with chronic conditions, mothers at risk of delivering low birth weight babies and Ohioans with both mental and physical health conditions. These improvements have won widespread praise from advocates for low-income Ohioans and have also helped improve value for taxpayers. Maintaining maximum state control over the program helps maintain these unique Ohio improvements.
  • Responsible Medicaid management is essential to Ohio’s hard-won fiscal stability: With Medicaid consuming a greater portion of Ohio’s state budget than any other expense, careful and responsible management of the program is essential to preserving Ohio’s newly-regained fiscal stability after closing an historic $8 billion budget deficit without a tax increase two years ago. In fact, Ohio’s reforms have helped reduce the growth rate of Medicaid costs by a full 50 percent in the past two years. Maintaining maximum state control over the program helps preserve this fiscal progress.

BOTTOM LINE: Governor John Kasich and Lt. Governor Mary Taylor want every Ohioan to have health care coverage and believe the route to achieving that is a market-based system that encourages both high quality and low costs. A rigid, prescriptive health insurance exchange that reduces choices and drives up costs does not align with the Kasich Administration’s health policy goals. Turning down a state-based health exchange and saying no to federal regulation of Ohio’s health insurance industry and Medicaid eligibility determination is the best approach for Ohio, and Ohio will inform the federal government of its plan for preserving these rights early next year.

1 Based on report from KPMG LLP released on September 14, 2011.
2 Based on report from Milliman Inc. released on August 31, 2011.
3 Based on report from KPMG LLP released on September 14, 2011.



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