South Dakota Governor: Can’t “Plausibly” Build Exchanges

June 13th, 2015

The Governor of South Dakota stated the obvious–it will be impossible for the state to build an exchange if the Court rules against HHS in King v. Burwell.

Some have asked why South Dakota can’t simply switch to a state-run insurance exchange in this scenario, as the federal law clearly allows for subsidies to continue in states with state-run exchanges.

If only it were so easy. Creating a state-run exchange is not so simple as passing a law, signing a paper, or flipping a switch. It is an expensive and time-consuming process. It requires the participation of the insurance industry, the addition of new bureaucracies and regulatory schemes, and the costly creation of a sophisticated, web-based exchange portal.

After ACA passed, my administration undertook a detailed analysis of the pros and cons of a state exchange. This was not driven by politics; it was based on practical considerations of implementation. That analysis is available at http://federalhealthreform.sd.gov/documents/exchange_planning_effort_report.pdf.

That report estimated that it would cost $45 million to implement a state exchange for South Dakota, and that its ongoing operation would cost between $6 million and $8 million annually. We concluded that, for a small state like South Dakota, we simply did not have enough insurance consumers to bear the cost of creating and maintaining our own exchange.

 

The Governor urges the President to work with Congress:

If the Supreme Court rules against federal subsidies on federal exchanges, states like South Dakota could not plausibly set up state exchanges in the time that would be required and to attempt to do so would impose significant costs on our insurance consumers.

This is a federal problem that requires a federal solution. The root of this issue is that Congress rushed to pass this massive legislation without carefully reading it or considering its impacts. I hope President Obama will seek compromise with the Republican Congress to solve this problem, perhaps along with other common sense reforms. Our nation should not allow health insurance consumers to suffer for the sake of political purity.

Although Nick Bagley and others┬áhave highlighted a so-called “magic wand” bill in New Hampshire, that would just deem the federal exchange to be a state exchange, the Governor of South Dakota wisely notes that such a proposal simply would not work. I explore this in much more detail in my White Paper for the Federalist Society.