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.