Conservatives drop into states to stall reform

Published in POLITICO

By J. LESTER FEDER AND JASON MILLMAN

The Cato Institute’s Michael Cannon’s been racking up frequent-flier miles.

He’s dropped in on more than a dozen states to make the case to lawmakers that they should not lift one legislative finger to implement President Barack Obama’s health care reform.

“It has been a fun ride,” he said.

Conservatives like John Graham of the Pacific Research Institute have also been touring states through the platform provided by the American Legislative Exchange Council to help kill off state-based exchanges, a key piece of health care reform that will help millions of people purchase insurance coverage — often with federal subsidies — starting in 2014.

“Our approach has to be absolute noncollaboration, civil disobedience — well, not civil disobedience, but resistance … by whatever means,” said Graham.

Two years into the law’s implementation, conservative emissaries have contributed to impressive stats. Almost all red states are holding off on exchange legislation at least until the Supreme Court decides on the Affordable Care Act, and in most of those states exchange-building legislation has crawled to a stop.

Both funded partly by the Koch brothers, Cato and ALEC form the cavalry that state-based conservative organizations call in to convert Republican lawmakers who had been considering establishing exchanges. While no fans of the federal law, many Republicans in state government thought it was better to set up their own exchange than let HHS do it for them if the law survives past 2012.

Some still think that — and disagree with some of the assumptions and interpretations the fly-in conservatives are making. But Cannon and Graham are undeterred.

“Every time when I go into these states, there are usually a bunch of Republican politicians who have bought this line that creating a state exchange will protect them from Obamacare,” said Cannon. “It’s fun going in there and telling them, no, actually, if you want to protect your state, tell the federal government … ‘It’s your stupid law, you implement it.'”

In his view, state autonomy under health care reform is a mirage. States won’t actually have much control because the federal rules governing the exchanges are so far-reaching. The sole difference between a state-run and federal-run exchange, he says, is that a state will have to “to pay for the privilege of having their autonomy taken from them” if they pass their own bill.

Second, he argues that if states don’t act, employers will be better positioned to legally challenge penalties they would have to pay if their employees end up getting subsidized coverage in the exchanges.

Cannon contends that the legislation as drafted only allows the subsidies to be given through a state exchange — not a federal one. Most legal experts think this is a drafting error that the Obama administration can fix through regulation, but Cannon believes the courts will strike down any workaround.

One state where his message resonated was New Hampshire, which he visited at the invitation of the free-market think tank, the Josiah Bartlett Center for Public Policy.

The New Hampshire Legislature not only allowed a Republican-sponsored exchange bill to die this winter, but the House went a step farther and passed a bill prohibiting the state from enacting an exchange shortly after his visit.

And according to Maine Democratic state Rep. Sharon Treat, Cannon’s New Hampshire visit had a chilling effect across the state line. She had been in talks with some of her Republican colleagues about an exchange bill. That stopped.

“Now they’re advancing the idea of don’t do anything, because we don’t want to help President Obama,” she said.

This is exactly what the national conservative organizations had hoped for.

“It took a lot of people like Cannon and me and certain legislators to give some backbone” to lawmakers uncertain about drawing a hard line against exchanges, said the Pacific Research Institute’s Graham.

Graham said that national health experts are a vital resource for grassroots groups, most of whom do not have health care experts on staff. He, for instance, recently visited the Idaho Freedom Foundation.

“They have to outsource,” he said of the local organizations. “Grass-roots liberty groups, tea party groups call us and say, ‘What are the reasons to oppose an exchange again?'”

These efforts get a boost from another Koch-aligned group, Americans for Prosperity, which is trying to fight off exchanges in eight states. These efforts are mostly kept in-house, without help from outside groups.

“We work with the policy shop in D.C. a lot to make sure we’re on top of the 644 pages [of final exchanges rules],” said Teresa Oelke, director of AFP’s Arkansas chapter. “I think that is the largest point against the exchanges. We’re signing up for a program that we’ll have to pay for by January 2015, but the federal government has control of every single decision.”

The approach of these national organizations has reflected sophisticated lobbying know-how, suggested Alabama Republican Rep. Greg Wren, who is co-chairman of the National Conference of State Legislatures health reform task force. Though an ALEC member, Wren is one of the main Republican voices arguing that lawmakers who opt for doing nothing and open the door to a federal exchange are putting their state sovereignty at risk.

“They’ve targeted … leadership, committee chairs and often time people in those positions can stop or speed bump any kind of legislation,” Wren said.

Cheryl Smith also thinks the work by Cato and ALEC to derail exchanges looks reckless. She’s a former Heritage Foundation staffer who now directs the exchange practice of the consulting firm Leavitt Partners, which advises several red states trying to figure out how to handle the reform law.

Many legal experts doubt Cannon’s analysis of the health care law, she said, and it’s risky for state lawmakers to leave their state’s future up to uncertain interpretation.

“He may be right, but if you’re a state policymaker, do you really want to bet the farm on that?” she said.

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