With the advent of government-run exchanges in 2014, the entire health insurance industry will be competing to please Secretary Sebelius and her army of HHS bureaucrats, not the millions of consumers compelled by the tax code to buy a one-size-fits-all health plan.

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In its latest unveiling of ObamaCare mandates, the Department of Health and Human Services promises that the creation of government-run health insurance exchanges will give states more flexibility and consumers more choices.  But an examination of the rhetoric versus the reality reveals that these claims are just a smokescreen while HHS effectively nationalizes the entire health insurance market. 

When the final rule was announced on March 12, 2012, the HHS press release claimed that “[t]he policies released today will help states in designing their Exchanges to best meet the needs of their consumers.  They offer states substantial flexibility as they design a marketplace that works for their residents.” 

Thereafter, HHS Secretary Kathleen Sebelius is quoted as saying, “These policies give states the flexibility they need to design an Exchange that works for them.  These new marketplaces will offer Americans one-stop shopping for health insurance, where insurers will compete for your business.  More competition will drive down costs and Exchanges will give individuals and small businesses the same purchasing power as big businesses have today.”

The idea behind government-run health insurance exchanges is to allow individuals to pool their risk and buy group insurance at affordable prices.  The target consumers for such exchanges are individuals who work for themselves, small businesses and the underemployed, since all lack access to a risk pool big enough to make health insurance affordable. 

Many of the remaining health insurance consumers are either unemployed, and thus qualify for some form of government health plan, or receive insurance coverage from their employer. 

Current federal estimates peg the number of Americans likely to benefit from health insurance exchanges at 30 million.

But while the theory behind health insurance exchanges may sound appealing, the arguments used to sell the version created by HHS are distorting the true cost of implementing such a scheme. 

The initial cost is the loss of state sovereignty.  While no state is required to operate a health insurance exchange, if it fails to initiate one by January 1, 2014, ObamaCare authorizes Secretary Sebelius to step in and do so.  In the latter scenario, a state would be unilaterally cut out of any policymaking decisions regarding the portion of its residents that fall within the federal exchange’s targeted consumer base. 

Moreover, if employers decide to pay ObamaCare’s fine for not covering employees rather than shoulder the law’s increased costs – as a June 2011 McKinsey Quarterly report estimates as many as 30 percent of employers will likely do – millions more citizens will be driven under Secretary Sebelius’s direct control. 

The result isn’t much better if a state decides to create an exchange under HHS’s new final rule.  Although Secretary Sebelius claims that her 630 pages of new regulations are really just “guidelines” that “offer states substantial flexibility” to “design a marketplace that works for their residents,” HHS’s own summary of the rule says otherwise. 

Citing numerous sections of ObamaCare, HHS warns states that the law “specifies that Exchanges may not establish rules that conflict with or prevent the application of regulations promulgated by the Secretary.”  In this field, she is given “broad authority… to establish standards and regulations to supplement the statutory standards related to Exchanges…” 

And just in case anyone thinks the word ‘final’ before ‘rule’ implies that no other bureaucratic fiats will be made in the future, HHS says “this final rule does not address all of the Exchange provisions in the Affordable Care Act; rather, more details will be provided in forthcoming guidance and future rulemaking, where appropriate.” 

In just a few short sentences, every state in the Union can be certain that all power of discretion comes from Washington, D.C. 

The same is true for consumer choice.  According to the new rule, health insurance companies must meet certain standards to become qualified participants in the government-run exchange. 

But because ObamaCare creates tax incentives and subsidies for purchasing plans on the exchange, many companies rightly fear that failing to qualify as participants will ultimately harm their businesses since those benefits are not extended to plans offered outside the exchange. 

Thus, with the advent of government-run exchanges in 2014, the entire health insurance industry will be competing to please Secretary Sebelius and her army of HHS bureaucrats, not the millions of consumers compelled by the tax code to buy a one-size-fits-all health plan. 

Make no mistake.  The new health insurance exchange rule announced by Secretary Sebelius is an even greater threat to freedom, affecting millions more people, than her decision to force religious institutions to violate their consciences.  The problem is her power.  Stripping her of it requires repealing ObamaCare – the sooner, the better.