Health Insurance Exchanges Policy Issues Timothy Stoltzfus Jost

Health Insurance Exchanges: Policy Issues Timothy Stoltzfus Jost Washington and Lee University

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

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

What do we expect an exchange to do? • Make insurers more accountable • Facilitating other features of health reform

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

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

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

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

How are the House and Senate exchanges different? • Another major difference—exclusivity 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

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 Manager’s Amendment allows exchange to “take into account” excessive or unjustified premiums in certifying plans to participate.