Response to Gov. Daniels on Indiana and Implementing the Affordable Care Act

The Honorable Mitchell E. Daniels, Jr.
Governor of the State of Indiana
Office of the Governor
State House, Second Floor
Indianapolis, IN 46204

Dear Governor Daniels:

Thank you for your July 30 letter requesting guidance from all three candidates for governor of Indiana regarding decisions Indiana must make about the implementation of several provisions of the Affordable Care Act. Given the impact of these decisions on every Hoosier and the fact that the weight of such decisions will be borne by the next administration, I commend you for your solicitous approach.

Americans have the highest quality health care in the world. For most Hoosiers, the biggest challenge is the cost of that care. Too many are priced out of the health insurance market. The two most obvious solutions to this challenge are increasing the number of good-paying jobs and improving the affordability of health care itself.

chart-1For years, Hoosiers have struggled to find solutions to rising health care costs and access to health care, especially for our most vulnerable citizens. In 2007, a bipartisan, innovative solution to both cost and access was developed right here in Indiana.

Under your leadership, the Healthy Indiana Plan was adopted, giving Hoosier adults between 19 and 64 access to health care in a consumer-driven model that empowers health care consumers to direct their own care. More than 40,000 Hoosiers have access to health care under the Healthy Indiana Plan (see Chart 1), along with a POWER account that gives them a financial incentive to find the most affordable health care services and to improve their health.

According to a recent survey, 94 percent of participants were satisfied with the program and 99 percent indicated that they would re-enroll. The Healthy Indiana Plan therefore empowers Hoosiers in a way that will increase access to health care and drive down the cost, and I believe it is the model that should serve as the starting point for all future discussions of health care reform in Indiana.

Unfortunately, the Obama Administration and its allies in Congress charted a far different course in 2010. The Affordable Care Act raised taxes on every Hoosier taxpayer and business (see Table 1), doubled down on an already broken and unaffordable Medicaid system, and, left unchecked, it will destroy all the progress we have made on health care access, not to mention our economic competitiveness and fiscal solvency for our state and country.


As you are aware, I opposed the Affordable Care Act and believe it must be repealed. It erodes the freedom of every American, opening the door for the federal government to legislate, regulate and mandate nearly every aspect of our daily lives under the guise of its taxing power. It is not merely a government takeover of health care, but, as the Supreme Court recently concluded, it is a massive tax increase on Hoosiers and small business owners.

Every day in Indiana people tell me that ObamaCare is stifling our recovery. If it is not repealed in full, Hoosiers will face higher health care costs and increased taxes.

The tax increases in ObamaCare have directly led to lost job opportunities here in Indiana, as seen by Cook Medical’s recent announcement that it will not expand operations in Indiana due to the medical device tax. The Medicaid program continues to be one of Indiana’s largest budget items. Its costs grow every year and we have struggled to pay for our existing program. The Medicaid expansion would increase dependency by putting one quarter of all Hoosiers on Medicaid and could cost Indiana billions between now and 2020.

chart-2The health care law also will drastically increase the cost of health care premiums in Indiana – at least a 75 percent increase in the individual market and a 5 percent increase in the small group market (see Chart 2). This will lead to even more dependency on government subsidies for health care.

The Affordable Care Act also violates the inherent sovereignty of the State of Indiana. The Supreme Court invoked this principle in striking down as unconstitutional part of the health care law for coercing the states through its massive expansion of Medicaid. As the Supreme Court explained just last year, diminishing the sovereignty of the states against the federal government imperils the liberties of the citizens and families within those states.

Indiana needs the freedom and flexibility to develop health care solutions that best meet the needs of our citizens, without interference from Washington. We must face our challenges in health care with the belief in more freedom, not more government.

Indiana has proven that we can find innovative solutions to the problems of affordability and access to health care. We don’t need a federal, one-size fits all solution that hampers our ability to promote Hoosier solutions to Hoosier problems.

Because ObamaCare erodes the freedom of every Hoosier, will increase the cost of health insurance, and will cripple job creation in our state, I believe the State of Indiana should take no part in this deeply flawed healthcare bureaucracy.

Despite my opposition to the Affordable Care Act in principle, I do understand that some who opposed the health care law nonetheless believe Indiana would be better off if we set up our own exchange.

Beyond my previous objections to ObamaCare, I have carefully considered this option, and believe there is too much uncertainty surrounding the Affordable Care Act to make it prudent for Indiana to even consider moving forward in implementing our own exchange.

First, the national debate over the Affordable Care Act is far from over. While the Obama Administration, its allies in Congress and the Supreme Court have had their say on this health care law, the American people will have their say in November. With such political uncertainty surrounding the Affordable Care Act, it would not be prudent for the state to require Hoosiers to spend their time and hard-earned money on the implementation of a federal health care law that may be overturned in the next Congress.

Second, there is too much regulatory uncertainty surrounding the operation of exchanges. The federal government is still delinquent on complete guidance for exchanges and there are many unanswered questions. Just last week, it was revealed that the federal government still refuses to answer whether the Healthy Indiana Plan can serve as the coverage vehicle for the Medicaid expansion under the Affordable Care Act. Furthermore, a state operated exchange will still be subject to federal oversight, regulation and delay in the future. Operating our own exchange might seem like a way around the health care law’s onerous regulations right now, but the way the regulations are written, the federal government will be hyper-regulating state-based exchanges. This would reduce the State of Indiana to a branch office of the Department of Health and Human Services, and leave Indiana lawmakers to blame for the price increases that will occur and for market related decisions that are largely outside their control. All told, this is entirely too much regulatory uncertainty to justify moving forward at this time.

Third, there is fiscal uncertainty. The cost to Hoosier taxpayers for setting up our own exchange could be at least $50 million per year and perhaps higher. There is no evidence that this investment will improve the lives of Hoosiers, or will lower the cost of health insurance. This is money that would be better invested in helping our kids achieve educational results, providing tax relief for all Hoosiers, or addressing the cost drivers of health care and improving quality and health outcomes.

Finally, there is legal uncertainty surrounding state-operated exchanges. Some experts argue that the Affordable Care Act’s mandate on employers, which would raise taxes on Hoosier businesses by imposing a tax penalty if those employers fail to provide federally-approved health coverage policies for their employees, can only be triggered by the granting of premium subsidies to finance purchasing individual policies on a state-based exchange. The Internal Revenue Service recently issued an interpretive rule attempting to clarify that subsidies which clearly apply to purchases made on state-based exchanges also apply to purchases made on federal exchanges, which makes it all the more likely that the issue will be litigated at some point in the future.

With our unemployment rate at 8.2 percent and too many Hoosiers out of work, I will not support the implementation of an Indiana exchange when there is a chance that doing so would lead to a tax increase on Hoosier employers.

For all the foregoing reasons, it is my recommendation that the State of Indiana should not establish or operate a state–based health insurance exchange under the Affordable Care Act. In a word, Indiana should say ‘no’ to implementing ObamaCare.

Your letter also noted that the Affordable Care Act requires that insurance plans offered in the small and individual group market provide certain “essential health benefits.” I am aware that the State of Indiana has a choice to make in determining what is or is not “essential” for the purposes of the law and the decision has to be made by September 2012 or the federal government will make the decision for Hoosiers.

Given this expansive regulation of the insurance market in Indiana, my advice on essential benefits is that the choice be made with Hoosier values in mind. That means I believe Indiana should not endorse any “essential health benefits” package that goes beyond the requirements of Indiana law, especially as regards Hoosier values. Of course, the State of Indiana should endorse no plan that mandates abortion coverage or require Hoosiers to subsidize abortion through their health insurance premiums in the small and individual group markets.

Thank you for requesting my counsel on these important matters. I believe Hoosiers deserve to know where each candidate for governor stands on the Affordable Care Act.

Accordingly, if I have the privilege of being elected to serve as the next governor of Indiana, you may convey to the appropriate authorities within the federal government that my firm position will be that the State of Indiana should not establish or operate a state-based Health Insurance Exchange under the Affordable Care Act.

I am grateful for your leadership, and I remain steadfast in my belief that we Hoosiers have demonstrated our capacity to solve the issues of health care access and affordability, and once ObamaCare is repealed Indiana can play a leading role in promoting healthcare reform that lowers the cost of healthcare without eroding our freedom or prosperity.



Mike Pence
Republican Candidate for Governor