Michael Tanner

With the fate of the Patient Protection and Affordable Care Act, a k a ObamaCare, looking increasingly tenuous after yesterday’s Supreme Court session, officials in New York and New Jersey should rethink their rush to set up state insurance exchanges under the law.

ObamaCare orders every state to establish a health-insurance exchange, which is supposed to make it easier for consumers to shop for insurance, while providing a mechanism through which Washington can funnel subsidies. If a state fails to establish such an exchange, the feds will theoretically step in and set up their own exchange in that state.

In New York, the Republican-run Senate has balked at setting up a state exchange, but Gov. Cuomo reportedly plans to do so by executive order, in part as a show of support for President Obama’s signature initiative. New Jersey’s Legislature has passed a law to do the job, but Gov. Chris Christie has significant discretion on how fast to proceed.

Most observers now feel that there’s a real possibility that the high court may strike down at least the law’s individual mandate; if it does, there’s an excellent chance it will strike down the entire ObamaCare law, exchanges and all. Why rush to establish a costly bureaucracy to implement a law that may no longer exist after the court’s decision in June?

But even if ObamaCare is upheld, states have good reasons to avoid setting up an exchange.

First, there’s the expense. The few studies done on this suggest exchanges won’t be cheap. For example, one study suggests it will take a 5 percent tax on insurance premiums to pay to operate Oregon’s exchange.

New York and New Jersey taxpayers will love that.

Michael Tanner

Michael D. Tanner is a senior fellow at the Cato Institute, heading research into a variety of domestic policies with particular emphasis on health care reform, welfare policy, and Social Security. His most recent white paper, "Bad Medicine: A Guide to the Real Costs and Consequences of the New Health Care Law," provides a detailed examination of the Patient Protection and Affordable Care Act (Obamacare) and what it means to taxpayers, workers, physicians, and patients.