Health Insurance Exchanges: Policy Issues

1
Health Insurance Exchanges Policy Issues

• Timothy Stoltzfus Jost
• Washington and Lee University

2
The exchange in health reform

• Final legislation certain to include an exchange
• An exchange is an organized market for health
  insurance
• Examples of exchanges or exchange-like programs
  include
• The Massachusetts Connector
• The FEHBP, Medicare Advantage , Medicare Part D
• The Clinton plan health alliances
• Purchasing cooperatives

3
What do we expect an exchange to do?

• Manage competition among insurers (focus
  competition on price and quality rather than on
  risk)
• Create a large risk pool allowing risk to be
  managed more effectively
• Reduce administrative costs in insuring
• Make insurance markets more transparent and
  facilitate consumer choice

4
What do we expect an exchange to do?

• Make insurers more accountable
• Facilitating other features of health reform

5
In many respects the House and Senate exchanges
are similar

• Exchanges open to individuals in the nongroup
  market and to employees of small employers
• Standardized benefit packages organized in tiers
• Transparency and disclosure requirements
• Premium subsidies only available through exchange
• Some discretion over whether or not to offer
  health plans

6
In many respects the House and Senate exchanges
are similar

• Both bills outlaw health status underwriting and
  preexisting conditions exclusions
• Both contain programs for reallocating risk
• Both allow grandfathered policies to exist
  outside of the exchange

7
How are the House and Senate exchanges different?

• House bill has a national exchange with provision
  for state opt out
• Senate bill has state exchanges with provision
  for a federal intervention if a state fails or
  refuses to create an exchange
• State operation offers knowledge of local
  insurance markets and regulatory environments

8
How are the House and Senate exchanges different?

• Federal program advantages
• Larger risk pools
• More efficient (one rather than 50 programs)
• Federal government has extensive experience with
  exchanges, many states have none
• Nationally uniform program sets floor, states
  that want to go further can opt out

9
How are the House and Senate exchanges different?

• Another major differenceexclusivity of the
  exchange
• House bill, nongroup market wholly within
  exchange (other than grandfathered policies)
• Senate bill, nongroup market outside exchange,
  less regulated
• Senate bill, same risk pool and prices in and
  out, risk reallocation, but difficult to
  administer

10
How are the House and Senate exchanges different?

• House bill requires insurers to bid for
  participation and allows exchange to negotiate
• Senate bill does not require negotiation, but
  Managers Amendment allows exchange to take into
  account excessive or unjustified premiums in
  certifying plans to participate.