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Goldwater Institute Urges Lawmakers to Say "No" to State Insurance Exchanges

November 14, 2014

Contact: Michael Kelley, (602) 633-8965

Phoenix, AZ—If Arizona lawmakers enact a state health insurance exchange as allowed by the federal health care law, Arizona taxpayers will be on the hook for direct subsidies to insurance companies, and employers in the state who decline to provide government-approved employee health insurance will face fines of up to $2,000 per employee annually, explains a Goldwater Institute Policy Memo released Tuesday.

In a memo to Arizona legislators and policymakers, Goldwater Institute Center for Economic Prosperity Director Byron Schlomach and Goldwater Institute attorney Christina Sandefur write that the recent U.S. Supreme Court ruling on the federal health care law puts state legislatures in a unique position to adopt meaningful health care reform policies—in particular, with regard to choosing whether or not to set up a state health insurance exchange in conjunction with the federal law.

Under the federal health care law, states may either set up a state-run health insurance exchange with initial federal startup funds, or they may allow the federal government to set up an exchange. According to today’s memo, the belief that a state health insurance exchange affords a state more freedom to choose what kind of health insurance plans are offered in that state is misguided.

According to the memo, states that decline to establish their own insurance exchanges can mitigate some of the most damaging effects of the federal health care law.  In state-run exchanges, private insurance companies will receive direct government subsidies, but these subsidies are not available in federally run exchanges if states decline to participate.  Employers of more than 50 people that do not provide federally approved health insurance would be forced to pay fines of at least $2,000 per employee per year under a state insurance exchange, but no such penalties exist if a state declines to set up an exchange.

“State exchanges are nothing more than federally sanctioned, invitation-only clubs in which only government-approved insurance companies may sell only government-approved policies,” write Schlomach and Sandefur. “The law is clear that Washington bureaucrats will have the final say—even in state exchanges—about which doctors and insurance plans can participate, and what benefits must be provided.  State exchanges put state taxpayers on the hook to do the federal government’s dirty work.”

In addition to recommending that lawmakers decline to set up a state insurance exchange, today’s memo recommends several key reforms to maximize individual choice in health care, including requiring price transparency for medical services so that patients have more information about the true cost of procedures, expanding the health insurance market to competition, and transitioning to a Medicaid system that incorporates the best aspects of health savings accounts.

As the 2013 legislative session approaches, the Goldwater Institute will be working to educate lawmakers about the downsides of implementing state health insurance exchanges and the need for the additional reforms outlined in today’s policy memo.  Policy analysts Byron Schlomach and Christina Sandefur are available to discuss this with members of the media.

To read the entire Policy Memo, please visit:

To schedule an interview with a Goldwater Institute policy analyst, please call or email Communications Director Michael Kelley at (602) 633-8965 or



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