Much of the angst here at Daily Kos regarding the inadequacies of health care focuses on the lack of a public option in the final bill. I, too, am disappointed it has been excluded. But there is another compromise in the bill that I find almost as troubling – that being the inclusion of state-based insurance exchanges over a single national exchange for individuals and small businesses.
Much of the angst here at DailyKos regarding the inadequacies of health care focuses on the lack of a public option in the final bill. I, too, am disappointed it has been excluded. But there is another compromise in the bill that I find almost as troubling – that being the inclusion of state-based insurance exchanges over a single national exchange for individuals and small businesses.
As recently as January, President Obama was sticking to his campaign promise to create a national exchange. There were even signs that the Senate might acquiesce to the House and compromise on it in Conference. What happened? The election of Scott Brown.
With Brown's election, as you all know, we found ourselves in the predicament of the last several weeks. The House had to pass the Senate bill as is (without the exchanges) and reconciliation is being used to "fix" certain aspects of the Senate bill. However, the exchanges do not
directly affect the federal budget, and are therefore ineligible to be addressed in reconciliation.
So why is a single national exchange superior to the state-based approach?
About two months back, the Wonk Room at Think Progress put together a great, simple table that highlights the differences in the two approaches as highlighted in the House and Senate bills:
National Exchange (House Bill):
A single national exchange would create a larger risk pool that could lead to lower costs and greater administrative efficiencies.
Uniform implementation, states would not lag behind.
To eliminate adverse selection and prevent insurers from attracting the healthiest applicants outside of the exchange, all nongroup policies have to be sold inside the national exchange.
The exchange can negotiate premiums, administrative costs with insurers, selecting only the most prudent of policies.
State-Based Exchanges (Senate Bill):
State-based exchanges. States would have to pass a law establishing the exchange and would be responsible for running it. If a state fails to establish an exchange by January 2014, the federal government could build it.
All 50 exchanges would operate independently. States would receive seed money to establish their exchanges but they would have to fund and maintain the operation using their own funds and would presumably raise that money from a tax on insurers.
States facing budget problems or political interfighitng would be slow to implement the exchange or effectively regulate the insurance product they sell.
The nongroup market can exist outside of the exchanges. Insurers that participate in the exchange would be required to market the Silver and Gold tier plans in the exchanges but would be exempt from marketing the Bronze plan within the exchange. Insurers could therefore market the lower-cost/high deductible Bronze plan outside of the exchange or stay out of the exchanges altogether and attract healthier people into the non-exchange nongroup market.
The exchanges can take an insurers’ premium history into account. Some discretion for the exchanges to negotiate with plans around premiums.
Jonathan Cohn and Ezra Klein have made similar arguments. Klein even called it "the most important, undernoticed part of health reform."
But thanks to the Senate bill, this is all for naught. State-based exchanges will be the reality. Rather than the HHS regulating your health plans, your elected state insurance commissioners will still have more power. While a lot of us have expressed hope that passing health care reform is an important first step that can be improved upon (I agree), I do question how easy it will be to ever switch away from state exchanges within any realistic time frame given the infrastructure that will be invested in them.
For those who do want to see what an exchange looks like in reality, here is the Massachusetts Connector.