From: Heartland Institute: The Government Relations Team
To: Dean Sanpei,
Subject: The Leaflet - What the Affordable Care Act Problems Mean for States
Date: Thu Oct 31 19:49:50 MDT 2013

What the Affordable Care Act Problems Mean for States


Health and Human Services Director Kathleen Sebelius took to Capitol Hill yesterday to testify before the House Energy and Commerce Committee to defend the Affordable Care Act, aka Obamacare, and answer questions regarding the federal health insurance exchange.

Since its formal launch a month ago, the federal health insurance exchange and its Web site,, have been plagued by technical problems. Additionally, at least 1.5 million people have been notified they will not be allowed to keep their current health insurance plan.

In reaction to the testimony Benjamin Domenech, senior fellow for The Heartland Institute, said, “if Sebelius and her fellow bureaucrats can’t fix the exchanges within the next few weeks, the pressure for delay of this unworkable law will become enormous. Already 10 Senate Democrats favor delay of the individual mandate – and barring a miracle of technocratic governance, soon, it will be many more.”

Beyond the problems with the exchanges and people being dropped from their current insurance plans, other problems – such as doctor shortages, premium increases, and access shortages – are also gaining attention.

Doctor shortages: The New York Post reported, “A poll conducted by the New York State Medical Society finds that 44 percent of MDs said they are not participating in the nation’s new health-care plan.”

Premium increases: According to Michael Cannon of the Cato Institute, “Comparisons of exchange premiums with those found prior to October 1 show that premiums are higher now in at least 45 states, in some cases as much as 256 percent higher. As predicted, the young and healthy are seeing the biggest increases. And many experts warn that we won’t know the real extent of Obamacare premium increases until next year.”

Access shortages: According to an analysis by, “Americans who sign up for Obamacare will be getting a big surprise if they expect to access premium health care that may have been previously covered under their personal policies. Most of the top hospitals will accept insurance from just one or two companies operating under Obamacare.”

The current problems and uncertainty surrounding Obamacare are even more reasons why states should not expand an already financially stretched and struggling Medicaid system.

This week’s edition of The Leaflet features research and commentary addressing privacy and Obamacare, online gambling, anti-bullying programs, temperature observations, net neutrality and credit union tax exemption.


John Nothdurft
Director of Government Relations



Research & Commentary: Privacy and Fraud Risks in Obamacare
Health Care

Implementation of the Patient Protection and Affordable Care Act, commonly known as Obamacare, has been far from smooth. An important problem beginning to draw more attention with the activation of the exchange Web sites is the potential for fraud, abuse, and breaches of privacy.

A single computer system, the Department of Health and Human Services (HHS) central data hub, connects the various state health insurance exchanges with federal government agencies such as the Treasury Department and Internal Revenue Service, and with other state agencies, to verify enrollees’ eligibility. If the hub were compromised, it would provide fertile ground for identity thieves. As recently as September 2013, one month before the program’s launch, legislators and the heads of several government agencies voiced their concerns about the security of the hub and the personal data moving through it.

These risks are not isolated to the federal hub alone; each state health insurance exchange also has the potential for massive data leaks. One such leak occurred just last month, well before Obamacare was set to begin. The leak occurred when an employee of MNsure, Minnesota’s Obamacare exchange, accidently sent an unencrypted file to the incorrect recipient, releasing the Social Security numbers, names, addresses, and other personal data of more than 2,400 people.

The second main privacy and fraud risk highlighted by critics is the use of “navigators,” representatives empowered to solicit applicants and work with them in the exchanges and to enter their personal information. These navigators have drawn controversy because they were not required by federal guidelines to pass a background check and the training period for each representative handling personal data amounted to only 20 hours.

Many of the major technological problems the exchanges are now facing arose from the rush to implement the system by its October 1 deadline. Several information technology experts engaged by The Wall Street Journal to examine the Web site and determine why it was having so many problems found the system had been hastily constructed and was built on a sloppy software foundation. In an interview with Fox Business News, John McAfee of McAfee, Inc. said the online components of Obamacare could cause “the loss of income for the millions of Americans who are going to lose their identities.”

These technical problems have led several states to refrain from offering full online enrollment through their exchanges. According to the National Center for Policy Analysis, at least six states, including Colorado and Oregon, will not offer full enrollment online because the federal hub that helps the state exchanges determine eligibility is not working properly.

The Obamacare exchanges and the computer systems implementing them were hastily constructed and are deeply flawed. They place the personal information of millions of Americans at risk. State legislatures responsible for the state exchanges should pay attention to these problems and make sure they are addressed before they affect their constituents.



Research & Commentary: Online Gambling Legalization
Budget & Tax

In 2011, the Unlawful Internet Gambling Enforcement Act (UIGEA) was used to shut down the three biggest poker sites in the United States. In the summer of 2012, however, the U.S. Department of Justice reversed its action and is now allowing the poker sites to reopen, thereby implicitly permitting states to legalize online gambling.

Since the decision, several states have done so, with significant oversight and regulations. Delaware, Nevada, and New Jersey have legalized certain forms of online gambling within their borders, and California, Colorado, and Illinois have legalization bills in development.

In this Research & Commentary, Matt Faherty argues in general, government should not interfere with individuals’ entertainment habits. Gambling does pose risks, but most responsible adults can partake in it safely, and the legality of casinos, lotteries, and other gambling venues undermines the case against online gambling. “Legalizing online gambling would enable more individuals to enjoy gambling, provide substantial economic benefits to the states, and increase competition in the domestic gambling industry, benefiting consumers and responsible domestic casinos while boosting tax revenues.”


Commentary: Anti-Bullying Programs: Sound and Fury, Signifying Nothing


Research Fellow Joy Pullmann comments on a study from the University of Texas-Arlington that finds children who attend schools with bullying prevention programs are more likely to be bullied than children who do not.

The study’s lead author, Seokjin Jeong, says anti-bullying programs appear to teach kids new ways to hurt others and hide their activities from adults.


Research & Commentary: Temperature Observations

One of the central premises behind the concern that manmade greenhouse gas emissions may be causing dangerous global warming is that global temperatures have increased over the past century in concert with human carbon-dioxide production.

A report from the Nongovernmental International Panel on Climate Change (NIPCC), an independent group of some 50 scientists from 15 countries, titled Climate Change Reconsidered II: Physical Science (CCR-II) reports there has been little or no connection historically between carbon dioxide (CO2) levels and global temperature.


Research & Commentary: Network Neutrality

A current court case has reignited the debate over net neutrality. Net neutrality is a set of federal rules requiring Internet service providers to allow equal access to all online content and applications regardless of the source. Providers may not favor or block any particular product, service, or Web site. Net neutrality has been controversial since it was first proposed.

In 2010, the Federal Communications Commission (FCC), which administers telecom rules and regulations, lost a legal battle with Comcast when the court decided the FCC did not have the authority to stop Comcast from slowing BitTorrent traffic on its network. The case currently before the DC Circuit Court involves a challenge by Verizon against the Open Internet framework, aka net neutrality. Verizon is arguing Open Internet is a burdensome regulation that makes it difficult to expand Internet services and their overall business.

In this Research & Commentary, Matthew Glans contends net neutrality impedes broadband development, blocking Internet service providers from managing the networks they spent billions of dollars to build. “When the profit incentive to build new networks is blunted by burdensome regulation, lawmakers should not be surprised that providers are reluctant to expand. This hurts the telecom industry and consumers, who lose out on new products and services. The best way to ensure fair service is to promote competition by reducing, not adding, regulations.”


Research & Commentary: Credit Union Tax Exemption
Finance, Insurance, and Real Estate

The banking industry is using current efforts to reform the federal tax code as an opportunity to push for ending the federal income tax exemption for credit unions.

Credit unions have been exempt from the federal income tax since the Great Depression, in order to increase their ability to provide credit to lower-income families. This exemption was granted under the condition that the credit unions be “organized and operated for mutual purposes and without profit,” according to the Internal Revenue Service. The banking industry has argued for decades that this exemption gives credit unions an unfair advantage.

In this Research & Commentary, Matthew Glans examines the credit union tax exemption and the effect ending it would have on the industry and consumers. Glans argues credit unions have taken up much of the slack of banks, making the loans to small businesses clamoring for credit that others will not make. He also says ending the tax exemption would create double taxation and cut off credit to people who need it the most.


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Health Care News

The November issue of Health Care News reports on the ultimately unsuccessful effort by Republicans to use the federal government shutdown as leverage to delay the problem-plagued launch of the Obamacare insurance exchanges. (One cannot help but wonder whether at least some administration officials wish Republicans had succeeded ...)

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