Exchanges are getting major play on the Hill and in the blogs this week, where the fight seems to be: Federal (as the House and White House propose), or State (as the Senate bill does)? While that’s certainly a question, we argue that perhaps that’s not the question on Exchanges.
Here’s why. As we pointed out last week, a national Exchange isn’t likely to be the savings boon some claim, since many of the factors that influence an insurance market are local. And while folks like Igor Volsky at Wonk Room and Jon Cohn at The Treatment worry that some states are bound to execute insurance regulation more poorly than others, a future federal administration hostile to health reform could undermine the whole thing (see Bush administration for examples).
So it seems, with all these variables floating around, that those of us concerned about the availability of quality insurance that consumers can afford should, instead of hitching our Exchange wagon to a state or federal horse, make a list of criteria that add up to a strong Exchange – at the state or federal level. We went ahead and did that. Here’s our top ten.
1. Authority to negotiate and contract with health plans. The House bill provides the Exchange stronger authority to choose insurers based on their plans’ benefits, provider networks and value. Experience from Massachusetts’s Exchange (the Connector) has shown that offering selective plans provides clear insurance choices and can help hold down cost.
2. Create one insurance pool. Insurers will be insurers, and if they are able to create separate risk pools inside and outside of the Exchange, (and, say, attract healthier people outside the Exchange) they will. The House addresses this problem by requiring all individual market plans to be sold only through the Exchange. The Senate bill requires insurers to pool risk both inside and outside of the Exchange, but it’s unclear that this will do the trick.
3. Maximize market authority. An Exchange can only hold down insurer costs if it has market authority—and to have this, the Exchange needs to cover a significant share of people. It’s important to broaden, not carve up, insurance markets to provide Exchanges with enough covered lives to be able to negotiate good prices and coverage with insurers. The Senate does the opposite, proposing to split up the individual and small-group insurance markets into two separate Exchanges. Instead, both markets should be included in one Exchange.
4. Require qualified benefit plans inside and outside the Exchange. In the Senate bill, “qualified plans”—plans that must offer an essential benefit package—are required only inside of the Exchange. Without rules about benefits and cost-sharing outside of the Exchange, insurers may attempt to design benefits in a way that reduces their risk (and costs). An essential benefit package should be required in and outside of an Exchange.
5. Public oversight and involvement. Another important lesson from Massachusetts’s Exchange/Connector is that it works best when all debate and decisions are subject to open meeting laws and consumers are represented in decision-making. This should be strengthened whether the Exchange is at the federal or state level.
6. Ensure clear, transparent information. One of the main reasons for an Exchange is to provide easy-to-understand information about health plans that helps people make informed choices about their coverage. The Senate bill has stronger requirements on providing this information—and includes things like in-depth descriptions of coverage and cost-sharing scenarios for common medical services, like pregnancy or chronic illness. The Senate Exchanges also use Navigators, run by trade organizations or community-based non-profits, to provide information and one-on-one assistance with enrollment in health plans.
7. Prohibit conflicts of interest. The Exchange is a marketplace for choosing insurance options, and should be neutral. There should be strong standards to ensure that insurers, insurance agents, providers, and others who would profit from enrollment cannot govern the Exchange.
8. Offer plans with similar benefits and cost-sharing to help people make meaningful comparisons. Both House and Senate bills define the levels of coverage through “tiers” based on actuarial values (or the share of medical expenses the health plan pays for a standard member) to facilitate comparisons by consumers. However, using actuarial values as a way to standardize plans still allows for major differences in benefit limits and cost-sharing (even among plans in the same tier) and makes comparisons difficult for normal people.
To increase the comparability of plans, the merged bill should create tighter benefits and cost-sharing restrictions among plan tiers.
9. Regulate insurers. An Exchange should regulate insurers, including oversight of premium increases, marketing and profits. To monitor the impact of these requirements, Exchanges should collect data on compliance, and make this information available to the public.
10. Create fair insurance rules. An Exchange is only as strong as its insurance regulations. The House bill has stronger limits on the amount that premiums may vary (for instance, the House allows premiums to vary based on age, constrained to a 2:1 ratio; the Senate allows a 3:1 ratio).
–Christine Barber, senior policy analyst