PHOENIX (Apr. 14, 2015) – Arizona Gov. Doug Ducey has signed a bill into law that creates significant roadblocks for implementation of the Affordable Care Act, leaving the federal program without an enforcement mechanism in the state.

Introduced State Reps. Justin Olson and Vince Leach, House Bill 2643 (HB2643) prohibits the state in various ways from “from using any personnel or financial resources to enforce, administer or cooperate with the Affordable Care Act.”

“If the federal government is going to enact a law, then the federal government needs to enforce that law,” said Olson. “We’re not going to do it.”

With just five minutes left before the Senate closed for the 2015 legislative session, the bill was given final approval in the Senate, by a 16-10 vote, and the House with a 34-24 vote.

PRACTICAL EFFECT

Most prominent in the bill’s list of prohibitions is a ban on “funding or aiding in the prosecution of any entity for a violation of the act.” This would prevent the Arizona Department of Insurance (DOI) from investigating or enforcing any violations of federally mandated health insurance requirements, something that will prove particularly problematic for the feds.

State insurance commissioners and departments serve as the enforcement arm for insurance regulations in the states. So, when people have issues with their mandated coverage, they will have to call the feds.

“That’s going to prove a bit problematic,” Tenth Amendment Center national communications director Mike Maharrey said. “Disputes about these mandates arise under federal, not state law. The federal Department of Health and Human Services can’t commandeer the Arizona Department of Insurance to force it to investigate alleged violations of PPACA mandates. Congress passed a law and failed to establish any enforcement mechanism, unless you count IRS enforcement of the mandate penalty – or tax – or whatever they’re calling it. I guess people can call the IRS with their insurance issues.”

Additionally, the bill expressly prohibits the state from “Limiting the availability of self‑funded health insurance programs or the reinsurance or other products that are traditionally used with self‑funded health insurance programs.”

According to Jack Biltis at Forbes, “Moving to a partially self-funded (aka partially self-insured) plan allows an employer to overcome most of the burdensome regulations and taxes, potentially reducing insurance costs by 40%-80%.” This is because self-insured health plans are exempt from many of the taxes and mandates that ObamaCare otherwise imposes on businesses and individuals. The NY Post called moving to these plans an “escape hatch.” And Obamacare supporters at the Center for American Progress considered such moves to be a serious threat to the viability of the federal act:

The result of this shift could cause an insurance premium death spiral and threaten the stability of the exchanges—the health care law’s new insurance marketplaces.

By preventing the state from taking actions to limit the availability of these self-funded programs, HB2643 creates a firewall against what government-run health programs are hoping to do – increase both federal and state control over them.

The bill also expressly prohibits the creation or operation of a health insurance exchange for the ACA. While former Governor Jan Brewer decided that the state wouldn’t create one, Maharrey said leaving such a big decision to the fate of a future Governor is precarious, at best.

“I don’t expect the new Governor to suddenly change course on an exchange, but you never know,” said Maharrey. “Governors all over have already flip-flopped on Common Core, so we can’t really trust them to do the right thing on this either. That’s why an express prohibition on creating an Obamacare exchange in Arizona is an additional protection for the people.”

Shifting the burden for health insurance exchanges to the feds helps overwhelm the implementation of Obamacare. Some analysts suggest that the feds only have the capacity to do so in 30-40 states over the long term, and any more than that will help collapse the system.

HB 2643 not only blocks the state from setting up a state-run exchange but also prohibits Arizona employees from helping residents enroll in a federally operated exchange. For example, if someone does not qualify for Medicaid but could find other health insurance through the ACA, under the new law, the state can not inform them of their options.

Beyond these prohibitions, the bill could cause some difficulty for IRS collection of the Obamacare tax. Currently, the IRS has no practical way to collect tax fines from people who refuse to pay them for lack of coverage. But, should the IRS ever gain Congress approval to start using liens to collect failure to pay penalties from people who refuse to sign up, they might not be able to record them with any level any county clerks or the Secretary of State in Arizona. Without liens, the IRS is already going to have a difficult time collecting, and if they’re permanently blocked from using them in Arizona, that would represent a significant layer of protection for the people there.

Maharrey said the new Arizona law represents step toward doing what Congress won’t – repealing the federal health care act.

“In Federalist 46, James Madison said states should refuse to cooperate with officers of the Union when the federal government passes ‘unwarrantable measures.’ Obamacare is the epitome of unwarrantable. This tangle of regulations and mandates that seems to mostly benefit big insurance companies is a disaster of epic proportions and needs to be dismantled before it causes irreparable damage to the U.S. economy,” he said. “Congress won’t ever repeal it, but if enough states follow Arizona’s lead, we can simply make the thing collapse under its own weight and open the door for a better approach to health care in America.”

LEGAL BASIS

HB2643 is a practical implementation of Proposition 122, a voter-approved amendment to the state constitution in 2014 that provides a mechanism for refusing state resources to federal programs.

Both Prop 122 and HB2643 are based on a long standing legal principle known as the Anti-Commandeering Doctrine. Over 170 years of Supreme Court precedent, dating from 1842, have supported the idea that states cannot be required to help the federal government implement or enforce their acts or regulatory programs.

The 1997 case, Printz v. US serves as the cornerstone. In it, Justice Scalia held:

The Federal Government may neither issue directives requiring the States to address particular problems, nor command the States’ officers, or those of their political subdivisions, to administer or enforce a federal regulatory program.

As noted Georgetown Law Constitutional Scholar Randy Barnett has said, “This line of cases is… considered well settled.”

NEXT UP

The new law goes into effect on July 3, 2015


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