Health Insurance Exchanges – Should Not Be Confused With the Affordable Care Act

In this edition of The Gallery, Dr. Wade F. Horn, Ph.D., a director in Deloitte’s State Government group discusses the potential impact of health insurance exchanges. The creation of health insurance exchanges are part of a new set of state health care requirements outlined in the Patient Protection and Affordability Care Act (PPACA).

Health care reform (HCR) can be a “game changer” for states — and, of course, it also isn’t without controversy. Indeed, across the country, legal battles are ongoing, with over half of the states challenging the constitutionality of the Patient Protection and Affordability Care Act (PPACA). If players in the debate aren’t careful, an unintended victim of these political and legal challenges may be an ingredient contained within PPACA but one which until now has typically enjoyed bi-partisan support: health insurance exchanges.

Central to PPACA is a requirement that states set up health insurance exchanges (HIX). A health insurance exchange is a marketplace that can offer purchasers of health insurance, be they employers or individuals, a variety of plans from different insurers. A public health insurance exchange is a marketplace run by a government entity and typically offers standardized health care plans for individuals and employers, some of whom may be eligible for federal subsidies.

Historically, most health insurance exchanges have enjoyed broad bi-partisan support. Some conservatives tend to like health insurance exchanges because they can provide a mechanism for introducing competitive market forces and consumer choice that could result, they hope, in lower prices and hence greater likelihood of accessibility to health insurance. Some liberals tend to like health insurance exchanges because they may have the intention of integrating access to private health insurance with access to public health insurance programs, most importantly Medicaid and the Children’s Health Insurance Program (CHIP). Public exchanges can also make the process of purchasing a health care plan more transparent, which consumers may increasingly be asking for across the board.

But this bi-partisan consensus that health insurance exchanges may have the intent to reduce costs while increasing access can face the possibility of disintegrating as a consequence of the controversy surrounding PPACA in general. Indeed, some are now making argument that support for health insurance exchanges may be akin to supporting PPACA in general. There is a risk that the historical bi-partisan consensus regarding health insurance exchanges can be lost in the struggle over PPACA as a whole.

Yet, upon closer observation, even those who are turning away offers for HIX funding under PPACA, may have not totally rejected the idea of a health insurance exchange. For example, although Governor Mary Fallin of Oklahoma recently elected to return federal “early adopter” funds for establishing an HIX, she has said the state remains committed to creating a HIX except with state and private funds.

One way to help reduce the possibility that the polarizing argument over PPACA does not overshadow or begin to eat away at the historical bi-partisan support for HIX may be for the federal government to work with states to support multiple models for setting up a HIX to help determine which may work most effectively, and under what conditions — utilizing the states as “laboratories of democracy.”

Indeed, two states have set up their own HIX prior to the passage of ACA – Utah and Massachusetts – both employing different models. For example, the Massachusetts connector was likely implemented to be an active purchaser of health care plans in that to be included in its exchange, private plans should receive the Connector’s “Seal of Approval” and can offer a pre-defined range of benefits. Utah’s exchange, in contrast, was likely designed to help allow a “willing provider” of a health plan to list its product so long as the plan meets minimum threshold requirements. Both, however, may share the capability of helping afford consumers the ability to “shop and compare” health plans that are listed within the exchange.

To date, the federal government has indicated that it can provide states with the flexibility to implement an exchange that could fit its particular needs. However, states may be still awaiting the final guidance from the federal government in terms of what can – and equally important, cannot – be required of state-based health insurance exchanges. Those proposed regulations may reportedly be released some time in “late spring. If these proposed regulations allow for sufficient flexibility in setting up a HIX, it could go a long way toward preserving the bi-partisan consensus around health insurance exchanges that pre-existed the passage of PPACA.

Not everyone is going to agree on each of the requirements of PPACA. But while agreeing to disagree, and despite on-going court challenges to the law itself, focus should not be neglected to be placed upon the things where there is broad agreement — one of which may be the power of HIXs to unleash market forces to help keep health care costs down, while increasing consumer choice and expanding access. What more proper time than now to grab consensus out of the jaws of controversy.

Wade F. Horn, Ph.D., is a director with Deloitte Consulting LLP in the organization’s State Government group, where he is a primary advisor to health and human services clients. Dr. Horn was the former Assistant Secretary for the Administration for Children and Families (ACF) at the U.S. Department of Health and Human Services (DHHS).


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