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Developing The Evidence On Why The “Choice” On Exchanges Is Unconstitutional

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Thanks to the Sonoran Alliance for reposting my piece on the choice facing every governor and state Attorney General: Whether or not to establish a state health insurance exchange or, by refusing to do so, allowing the federal government to offer the services of the federal health insurance exchange.

The reasons why the states should refuse to establish state exchanges are many and varied, but the most important reason is that the scheme is an unconstitutional assault on state sovereignty.

The wildly irresponsible incoherent aspects of the plan —outlined in part here by Ramesh Ponnuru— have absorbed most of the attention of the critics of the state exchange concept.

Today, though, I spoke with Virginia Attorney General Ken Cuccinelli and Georgetown Law Professor Randy Barnett about the consequences of the exchange provisions of Obamacare.

Professor Barnett is one of the country’s most accomplished scholars on federalism, but he is not yet persuaded that the impact of the federal exchange on state sovereignty is sufficient to question the constitutionality of the scheme. What is needed is evidence of the impact on state sovereignty.

He appreciates my metaphor: Imagine the consequences of piloting a supertanker into a small-to-medium sized harbor used for commercial fisherman and pleasure craft. The tanker would swamp the ordinary operations of the harbor, disrupt the settled laws and custons of the place, and almsot certainly have the de facto effect of obliging everyone to work around (and in some respects for) the supertanker company no matter whop was actually paying their wages.

He appreciates it, but is not persuaded –yet.

I suspect but cannot yet prove that the federal exchange will destroy the ordinary operations of the states when it comes to the regulation of the health insurance business. The overview of the state regulation of the health insurance industry provided in this 2006 paper should alert any fair-minded person to the obvious and enormous consequences of the appearance of the federal exchange. Among the most easily identified impacts will be those on the states’ employees who are presently involved in any of the state regulatory schemes. They will spend the next several years trying to figure out what the federal exchange does to all the laws and regulations they have been applying for years, striving to avoid conflicts and hoepfully working to keep their states’ employers out of federal noncompliance and as close to state compliance as possible.

This tornado of second and third-level impacts of a federal exchange will only be revealed when the federal exchange is finally established and its rules fleshed out. Professor Barnett will no doubt be studying those impacts as will a number of other enthusiasts of federalism, but I wonder if the specialists on the policy side might not already be able to predict with certainty what some of those consequences will be on the state government. I am not trying to win a policy argument here, but to accumulate some predictions of consequence which can be analyzed oppposite the Constitution’s guarantees of state sovereignty as explained by the Supreme Court in key decisions such as Printz v. United States and New York v. U.S.

So my appeal: If you are a state regulator of some aspect of health insurance –or one fo the regulated– how will a federal exchange impact your state’s ability to function as it has in the past. In particular, how many of your employees will be obliged to in effect work for the federal government even if your state has declined to develop a state exchange?

Your responses would be welcome in emails directed to

Thanks in advance for any help you can extend.


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