Health Exchange Regulation Flunks

12/08/2011 - 8:47am

F. That’s the grade Obamacare’s Health Insurance Exchanges regulation received from the independent Mercatus Center at George Mason University after receiving only 42% of potential points (25 out of 60) on a regulatory report card the Mercatus Center issued this week.

The Mercatus Center’s “Regulatory Report Card” project grades regulations based on whether the regulation has properly analyzed its own impact through its Regulatory Impact Analysis (RIA) statement.

The Health Insurance Exchange regulation (actually a set of regulations) creates the framework for states to set up online health insurance marketplaces. Just as Expedia® or PriceLine® are online market places for airline tickets and hotel reservations, a health insurance exchange is a place where you can compare multiple insurance plans. These market places will be used to disseminate $350 billion in federal health subsidies by 2019 and will certify as exempt those whom Obamacare excludes from its mandate to purchase health insurance.

The Exchange regulation’s score of 25 is the second lowest score Mercatus has issued for 2011 regulations. While the regulation received full points on only one question and mediocre reviews on other questions, the regulation received low scores for being difficult to find, for its poor cost/benefit analysis, and especially for lacking a method for measuring its own future success or failure.

“The Obama Administration has failed to make its case to the American people that the benefits of the Health Insurance Exchanges will outweigh their costs—that’s what this report tells us,” says Bill Wilson, President of Americans for Limited Government.

According to the Mercatus Center’s Jerry Ellig and Patrick McLaughlin, since the 1970s, federal agencies have been required to “analyze the anticipated results and economic effects of proposed regulations.”[1]

And since Ronald Regan issued Executive Order 12291 federal agencies have been required to justify significant regulations—meaning those regulations that will have an impact of $100 million or more. Reagan’s standard was that “potential benefits to society” had to be greater than the “potential costs to society.”

Today, we use a different standard—one diluted by Bill Clinton’s Executive Order 12866 which requires only that a regulation’s “benefits … justify its costs.”

The Health Insurance Exchanges are the centerpiece of Obamacare. If the Obama Administration gets an “F” in its justification of the benefits of the Exchanges over their costs to the American taxpayer, what does that say about the rest of Obamacare?

1. Jerry Ellig et al., The quality and Use of Regulatory Analysis in 2008 (June 22, 2010) 1 available at