The creation of state-based health insurance exchanges, expected to launch in each state in 2014, is a key element of the expansion of insurance coverage under the Affordable Care Act.
The exchanges will serve as a marketplace where individuals and businesses can shop for private insurance, comparing prices and benefits across private health plans. Individuals can also use the exchanges to check their eligibility for government programs such as Medicaid or the Children’s Health Insurance Program, as well as to learn if they qualify for subsidies such as tax credits to offset the cost of coverage.
By Prof. Sara Rosenbaum
The federal government has already proposed regulations outlining the process for how individuals and businesses can enroll in health plans and qualify for subsidies. In the future, the Health and Human Services department will publish rules describing the "essential" benefits that must be included in a plan in order to be offered on the exchanges.
Sara Rosenbaum, George Washington University health law professor, offers her views on how health insurance exchanges might work and what states need to do to make them successful.
QUESTION: Insurance exchanges aren’t just clearinghouses for choosing health plans. What else will the exchanges be able to do?
PROF. ROSENBAUM: I think the question is how active a state wants its exchange to be. In other words, an exchange can simply certify that all health plans that meet federal and state requirements are qualified to sell their products in the exchange. Or a state can take a much more active role and establish an exchange that will be an active purchaser of health care and will really do value-based purchasing, comparing health plans for their quality, their pricing, their performance, and potentially not let every health plan sell in an exchange. Other activities of the exchange will include all of the enrollment activities, collecting and reporting information on performance and quality, and oversight of plan performance.
QUESTION: Do you think the exchanges will lead to the availability of more affordable health plans?
PROF. ROSENBAUM: Certainly for people who have low and moderate incomes who get a subsidy, it will. For other people, the hope is yes. What the exchanges potentially will do is move the country toward a system of community rating. A community rate may carry a somewhat higher price tag for a young adult with absolutely no health problems, but it is nothing compared to what a young adult with any type of health issue would have to pay otherwise, assuming that the person could buy insurance at all. In the current market, young adults with conditions such as mild asthma can find that they are excluded from the individual insurance market or can buy insurance only at a prohibitive price and with a total exclusion on coverage of anything related to upper respiratory health. The community rating issue sounds somewhat costly for young adults, but not when you start thinking about what’s happening to young adults with any health problems today.
QUESTION: The exchanges likely will be similar to the Health Connector system created in Massachusetts. What are the lessons from that experience?
PROF. ROSENBAUM: One is that, if you make insurance available and affordable and easy to get to, people really take it up. The other big lesson from that state is that we better get real serious about access to primary health care. What has happened in Massachusetts is that all of the limitations on the state’s health care system – and it’s one of the healthier systems in the country – have been exposed by the wider availability of health coverage. Unfortunately, while the Affordable Care Act takes a lot of important steps to promote primary care, particularly in medically-underserved communities, it doesn’t make nearly the investment that was needed. It doesn’t deal with the fundamental problems of a shortage of primary care training. It doesn’t deal with making sure that primary care physicians get the resources they need to practice in every community where they are needed. We’ve got a long way to go to right the ship here.
QUESTION: What will it look like if the exchanges are well implemented, vs. if the implementation is unsuccessful?
PROF. ROSENBAUM: An exchange that has a glut of plans and makes no effort to actively oversee the market in order to assure strong products will not work well. Exchanges that do not have large numbers of younger healthy workers will not work well. And exchanges that do not have successful risk-adjustment systems to correct for qualified enrollment patterns that disproportionately skew enrollment by health status will not work well. Nor will exchanges that do not coordinate well with Medicaid because of the large number of younger working families whose incomes fluctuate at the lower end of the scale. They will end up as weak, high-risk pools. What is needed is an exchange that is really attractive to individuals and small groups and makes it easy for young adults to navigate. An exchange that can attract young people means that it won’t be a place for 60-year-olds with health problems only.