State-Run Insurance Exchanges in Federal Healthcare Reform : A Case Study in Dysfunctional Federalism

On March 23, 2010, President Barack Obama signed the Patient Protection and Affordable Care Act (“ACA”) into law, resulting in the most sweeping reform of the healthcare marketplace and one of the largest expansions in access to healthcare in American history. A key component to both restructuring the healthcare marketplace and improving access are the health insurance exchanges contained in the ACA. Today, individual and small group purchasers have difficulty finding affordable health insurance on the marketplace because they lack the tools to gather information about plans and because they lack the bargaining power to negotiate for affordable rates the way large purchasers can. In conjunction with the individual mandate, the health insurance exchanges aim to solve inefficiencies in the current marketplace by creating a centralized venue to connect insurers with individual and small business purchasers. Thus, it both creates a place for insurers to readily find customers, who are now guaranteed to be there because of the individual mandate, and provides a place for customers to shop for insurance. Rather than creating a national health exchange, and, in turn, a unified national insurance market, the ACA adopts a familiar federalist model that requires state-run exchanges to implement federal policy. This Note argues that the federalist structure of the insurance exchanges contained in the ACA is inefficient and ultimately self-defeating, both from a functional federalism perspective and because of the significant constitutional and political challenges it invites