Expanding Health Care Coverage: Proposals to Provide Affordable Coverage to All Americans
Description of Policy Options
Senate Finance Committee
May 14, 2009 (released May 11)
Health Insurance Exchange
Proposed Options
Plan Participation. All state-licensed private insurers in the non-group and small group markets, and the public health insurance option if applicable, operating nationally, regionally, statewide, or locally would be required to participate in the Health Insurance Exchange. Private insurers would also be permitted to sell these policies directly to purchasers.
And…
What Health Insurance Exchanges or Choice Pools Can and Can’t Do About Risks and Costs
By Rick Curtis and Ed Neuschler
Institute for Health Policy Solutions
May 2009
Health Plan Participation and Perspectives
Where health insurance pools or exchanges are an optional coverage venue, and there are no incentives or requirements for their use, exchanges that are expected to offer licensed health insurance plans need those plans more than the health plans need the exchange.
Most health plans strongly prefer direct contracts with with whole employer groups over enrollment through such purchasing pools. Their reasons include:
* Maintaining their business role. Many plans do not want to cede — to pools or to anyone else — administrative functions such as premium collection and enrollment. …they are concerned about losing revenues and functions that are a key component of their resource base and their value-added role as a business.
* Resistance to being “commoditized.” Health plans generally do not like competing head-to-head on price for the same benefit package.
* Fear of adverse selection where the pool, rather than the plan, controls marketing, eligibility, rating, enrollment, etc. Plans fear that, overall, purchasing pools will attract less healthy groups that can’t get coverage elsewhere — at least not as easily.
For these reasons, health plans are reluctant to participate in a pool or exchange that largely competes against plans’ own direct contracting with small employers or individuals. If they agree to participate, they likely will not offer lower prices to the pool/exchange than they charge for their outside business. Further, the general point made earlier is worth repeating: Most established health plans are unlikely to cooperate in helping a pool that competes for their direct enrollment. They generally have no desire to create a larger purchaser with more bargaining clout out of smaller, weaker employer groups or individuals.
Comment:
By Don McCanne, MD
What was the campaign rhetoric? Something like, “You can keep the insurance you have if that’s what you want, and, if you prefer, you can choose a plan like the members of Congress have.”
Although no final decisions have been made, our congressional leaders have made it clear that reform will be built on the existing model of private plans and public programs. Although the private insurance industry has promised full cooperation with reform, most moderates and progressives understand that legislated insurance market reforms will be essential if the industry is expected to live up to its promises.
Rather than a revolutionary transformation of the private insurance industry into a highly regulated social insurance program, Congress seems intent on establishing a Health Insurance Exchange, as described in the Senate Finance policy option paper. So that “you can keep the insurance you have,” the private insurance industry would be allowed to continue to offer their products directly to individuals and employers.
But think about that. Private insurers will continue to do what private insurers do well. They will do whatever is necessary to continue to insure the large numbers of individuals who are healthy, while shunning those with greater health care needs.
Employer-sponsored plans are often touted as the sector of health care coverage that is working well for us, though rising costs are a growing threat to the stability of these plans. These plans do work fairly well for some of us because they cover the low-cost healthy workforce and their young healthy families, they spread risk through larger, less expensive pools, and they have lower administrative costs than the individual and small group plans. The private insurance industry, either as insurers or as administrators for self-insured plans, will continue to thrive in this market.
So what is the purpose of the Health Insurance Exchange? It is a way of requiring plans to provide coverage to the much neglected individual and small group markets. The private insurance industry is already very wary of this market, and has responded with risk-avoidance behaviors that we find to be so repulsive. As Curtis and Neuschler explain in their report, the insurance industry will be “unlikely to cooperate in helping a pool that competes for their direct enrollment.” Again, private insurers being what they are, they will make every effort to be certain that their own subsidiaries in the Exchange will fail in their efforts to compete successfully with their private plans sold directly to purchasers.
Now step back and think about this. The comments here discuss only one paragraph in a 61 page report about policy options for reform, and this is only one of three reports that the Senate Finance Committee is releasing. The complexities of building reform on the U.S. business model of private plans make it absolutely impossible to create an equitable, efficient and affordable health care financing system for everyone. And the House leaders pledged today that they will pass a comprehensive reform bill by July 31! If you think the Clinton proposal was a
disaster, just wait!