I just finished reading Nicholas Bagley’s article, “What does the Gruber video tell us about Halbig?”, and Aaron Carroll’s article, “My one comment on Gruber and Halbig”, this morning when it struck me that there was a lot of circumstantial evidence that the federal government fully expected that they could convince states to set up exchanges. In 2010 I read some posts on The Incidental Economist website that trumpeted the healthcare.gov site so I checked it out. I found their insurance finder a “complete waste of time”. Obviously the writers at The Incidental Economist had never visited the site. The healthcare.gov site was a poorly designed information site that was completely unprepared for becoming a retail site for insurance. Whoever was running the healthcare.gov site thought that state exchanges were going to take the brunt of the load. Over the next couple of years there was lots of complaints that no one anticipated that the federal site would be the insurance exchange for 36 states. Everybody was saying the same thing, states were supposed to setup insurance exchanges. There is nothing that screams louder that the Affordable Care Act plan was for states to set up exchanges than the botched roll out of healthcare.gov.

So if we assume that the plan all along was for states to set up exchanges and that subsidies were not going to be used as leverage then how was the federal government planning to convince states to set up insurance exchanges? States would have to set up an organization kind of like the one they use to administer Medicaid and for most states the cost of administering Medicaid is a real pain in the budget. In the rough and tumble world of state politics and budget deficits what could the federal government offer states to offset the risk? Setting up a state exchange could be costly and embarrassing fiasco as Oregon found out. It almost looks like a Republican conspiracy to make traditional “blue” states look bad except without Republicans. What issue was big enough that Democrats would throw fellow Democrats under the bus? Until someone can explain to me the political and financial incentives for setting up state exchanges rather than using the federal exchange, I have to assume that the Affordable Care Act supporters decided to change course in mid-stream and it was part of their strategy. The only selling point for setting up state exchanges that had enough urgency was the subsidies. This was not a drafting error and I suspect there were Affordable Care Act supporters who questioned the wisdom of this strategy. To them the idea of restricting subsidies to the state exchanges was always a bluff so without much fanfare they  reverted to Plan B even though the law said otherwise and even more reluctantly started planning for a bigger healthcare.gov. Solely for political reasons they chose to save the Affordable Care Act by offering subsidies through the federal exchange and hoped to whether the storm.