OCPA Memorandum Trustees Blake Arnold # Oklahoma City Lee J. Baxter # Lawton Steve W. Beebe # Duncan G.T. Blankenship # Oklahoma City John A. Brock # Tulsa David R. Brown, M.D. # Oklahoma City Aaron Burleson # Altus Paul A. Cox # Oklahoma City Jay T. Edwards # Oklahoma City William Flanagan # Claremore Josephine Freede # Oklahoma City Kent Frizzell # Claremore Ann Felton Gililand # Oklahoma City John T. Hanes # Oklahoma City Ralph Harvey # Oklahoma City John A. Henry, III # Oklahoma City Henry F. Kane # Bartlesville Robert Kane # Tulsa Gene Love # Lawton Tom H. McCasland, III # Duncan David McLaughlin # Enid Lew Meibergen # Enid Ronald L. Mercer # Oklahoma City Lloyd Noble, II # Tulsa Robert E. Patterson # Tulsa Bill Price # Oklahoma City Patrick Rooney # Oklahoma City Melissa Sandefer # Norman Richard L. Sias # Oklahoma City John F. Snodgrass # Ardmore Charles M. Sublett # Tulsa Robert Sullivan # Tulsa Lew Ward # Enid William E. Warnock, Jr. # Tulsa Gary W. Wilson, M.D. # Edmond Daryl Woodard # Tulsa Daniel J. Zaloudek # Tulsa
Adjunct Scholars Will Clark, Ph.D. University of Oklahoma
David Deming, Ph.D. University of Oklahoma
Bobby L. Foote, Ph.D. University of Oklahoma (Ret.)
Kyle Harper, Ph.D. University of Oklahoma
E. Scott Henley, Ph.D., J.D. Oklahoma City University
Russell W. Jones, Ph.D. University of Central Oklahoma
Andrew W. Lester, J.D. Oklahoma City University (Adjunct)
David L. May, Ph.D. Oklahoma City University
Ronald L. Moomaw, Ph.D. Oklahoma State University (Ret.)
April 7, 2011
Can Oklahoma Create a “Free Market” Health Insurance Exchange Using the $54 Million Early Innovator Grant? By Jason Sutton, J.D. and Jonathan Small, CPA Introduction On February 25, Oklahoma leaders announced1 our state would accept a $54.6 million “Early Innovator” grant from the U.S. Department of Health and Human Services (HHS). The “Early Innovator” grants were authorized under the Patient Protection and Affordable Care Act2 (hereafter “Affordable Care Act”) to begin developing the information technology (IT) infrastructure for the “health benefits exchanges” as required under the Act. That decision has sparked much discussion and confusion regarding health insurance exchanges and the use of the federal grant to implement an exchange in Oklahoma. To their credit, Oklahoma’s leaders have, to date, been clear that their intention is to take the federal funds and create a health insurance exchange that empowers consumer choice through real competition—in essence, an exchange unlike those required under the Affordable Care Act. However, a serious question remains: Does the “Early Innovator” grant permit Oklahoma to use this $54 million to create the type of “patient centered,” “freemarket, conservative” insurance exchange state leaders are pursuing? The short answer to that question: highly unlikely. The $54 million “Early Innovator” grant is specific in its requirement that the state may only use the grant funds to create an exchange that complies with the requirements of the Affordable Care Act. First, it would be constructive to clarify some of the confusion regarding “health insurance exchanges” and to explain what state leaders have said they intend to do with the federal grant funds.
Ann Nalley, Ph.D. Cameron University
Bruce Newman, Ph.D. Western Oklahoma State College
Stafford North, Ph.D. Oklahoma Christian University
Everette Piper, Ph.D. Oklahoma Wesleyan University
Michael Scaperlanda, J.D. University of Oklahoma
Quentin Taylor, Ph.D. Rogers State University
Fellows J. Rufus Fears, Ph.D.
Dr. David and Ann Brown Distinguished Fellow for Freedom Enhancement
J. Scott Moody, M.A. Research Fellow
Andrew C. Spiropoulos, J.D. Milton Friedman Distinguished Fellow
Wendy P. Warcholik, Ph.D. Research Fellow
Staff Michael Carnuccio # President Brett A. Magbee # VP for Operations Brandon Dutcher # VP for Policy Margaret Ann Morris # VP for Development Jason Sutton, J.D. # Policy Impact Director Dacia Harris # Interactive Media Director Jonathan Small, CPA # Fiscal Policy Director Jennie Kleese # Development Events Manager Bob Provine # Controller Clara Wright # Hospitality Coordinator
What are health insurance exchanges? The requirement under the Affordable Care Act that states establish a “health benefits exchange”—or health insurance exchange—seemingly has been the most confusing aspect of the entire health reform law. It is important to note that health insurance exchanges pre-date the Affordable Care Act. Exchanges were developed nearly a decade ago by the Heritage Foundation, a conservative public policy think tank. The Heritage Foundation envisioned insurance exchanges as a centralized online “marketplace”—essentially a website—that was lightly regulated, where transactions costs were reduced, where all types of health products could be bought and sold, where all insurers could participate and compete, and where competition would promote real choices for consumers. As Robert Moffit, Ph.D., of the Heritage Foundation wrote in 2006:3
Oklahoma Council of Public Affairs, Inc. An Independent Think Tank Promoting Free Enterprise and Limited Government Since 1993 1401 N. Lincoln Boulevard # Oklahoma City, OK 73104 # (405) 602-1667 # FAX: (405) 602-1238 www.ocpathink.org # ocpa@ocpathink.org