Editor’s Note: The following excerpt is the first chapter to be published from Thomas P. Miller’s report: "When Obamacare Fails: The Playbook for Market-Based Reform."

State governors and legislatures face several deadlines in late 2012 regarding their possible participation in health benefits exchanges authorized by the Affordable Care Act (ACA).The Department of Health and Human Services (HHS) set Nov. 16 as the date for states to indicate more explicitly whether they plan to set up “state-based” exchanges in time for initial HHS approval by Jan. 1, 2013. If so, they then must demonstrate sufficient implementation progress to be ready to go for operations one year later. But even beyond those dates, states could instead choose to cooperate with the federal government in implementing an exchange or leave exchange operations entirely to Washington.

Many state officials have balked at participating in ACA-style exchanges and continue to do so. This chapter from the upcoming report "When Obamacare Fails: The Playbook for Market-Based Reform" examines what is behind that opposition. In particular, it highlights the differences between the promise of consumer-empowering, pro-competitive health exchange options and the likely reality of Obamacare’s exchanges providing single-track gateways to tighter regulation, income redistribution, and political dependency. The chapter concludes with a review of better policy options.