As health care reform efforts continue to unfold, much discussion revolves around the role of public health insurance exchanges ("public exchanges") in achieving the primary goal of the Patient Protection and Affordable Care Act (PPACA) – to provide U.S. citizens with affordable, quality health insurance.
By 2014, PPACA requires each state to offer public exchanges to residents, or in the alternative, a federally-run exchange system.[1] A recent blog post by Larry Levitt and Gary Claxton for Kaiser Family Foundation examines how insurance options outside the public exchange markets will change under PPACA, as well as the importance of maintaining a level playing field for health plan offerings both inside and outside the public exchanges (see Levitt/Claxton blog post).
Clearly PPACA intends to make the public exchanges a key offering for consumers, who need more accessible and affordable healthcare options at their disposal (see Insurance Broadcasting story). However, as Levitt and Claxton point out, options outside of the public exchange domain will remain an important part of America's health care system:
As central as exchanges will likely be, it's important to remember that there are other key provisions that help shape the reformed marketplace. Insurers will still be able to sell insurance to individuals and small businesses outside of the exchanges, and the health reform law applies new consumer protections to plans sold in that outside market, too.[2]
The Congressional Budget Office (CBO) estimates that 22 million people will buy coverage through the public exchange system by 2016.[3] As a result, "This leaves a substantial market for non-group and small-group coverage outside of the exchanges," according to Levitt and Claxton.
Levitt and Claxton assert that if you look "at the non-group and small-group markets combined and extrapolating the CBO projections, more people will likely be getting coverage outside of the exchanges (about 31 million) than inside (about 25 million)." [4] They further stress that it will be important to keep a level playing field between the public exchanges and the outside insurance marketplace:
If plans offered outside of the exchange are subject to fewer standards or less scrutiny, they may have a price advantage or, perhaps more worrisome, attract healthier enrollees, which would increase exchange premiums and potentially federal subsidy costs as well. Risk adjustment could compensate for this "adverse selection," but it's not likely to do so perfectly.[5]
Private Exchanges Can Co-Exist with Public Options
BenefitMall has promoted the advantages of recognizing the value of a health insurance system comprised of both private and public exchanges. PPACA's public policy goals will not be achieved unless private health insurance exchanges are allowed to co-exist with PPACA's public exchanges (see Benefit Mall blog).
The good news is that PPACA does promote state flexibility; the bad news is that some states are leaning toward the more restrictive public exchange models like Massachusetts, which could damage the private insurance market, cost more money than expected and ultimately undermine PPACA's goal of expanding meaningful coverage to millions of Americans.
Over 100 private exchanges are in existence today and cumulatively represent more than one-third of most insurance carriers' distribution efforts. BenefitMall is one example of a private exchange that is the largest distributor of small group coverage in the U.S.
The Mid-Atlantic region also offers an illustrative example of a public/private exchange model that works very well, which was a by-product of Maryland's small group reforms adopted over a decade ago. In Maryland and the surrounding states, multiple private exchanges serve as intermediaries working with brokers to help underwrite 625,000 policies in the state. BenefitMall proudly serves as one of these intermediaries offering a comprehensive sales and administrative services to dozens of carriers with over 500 health plans through a brokerage network of 20,000-plus agents.
Through its private exchange model, BenefitMall does more than support the sales and enrollment process. It also provides on-going eligibility determinations, payment coordination, renewal support, tracking of local purchasing trends, among other services through its best-in-class technology and Broker networks.
Private exchanges such as those in Maryland need to co-exist with public exchanges to ensure a "healthy" and effective health insurance system. In terms of meeting PPACA's goals, private exchanges will help public exchanges to:
- Extend coverage to more Americans
- Promote a stable and vibrant insurance marketplace
- Reduce unnecessary government expenditures
- Help maintain the right equilibrium of insurance risk pools between insurance markets
- Empower real choice of quality-based health insurance coverage options
Unfortunately, several states and national experts have expressed interest in positioning public exchanges as the only insurance source for individuals and small businesses. Moving in such a direction will not work and could create a health insurance marketplace meltdown. Only by offering private exchanges alongside federal or state-funded exchanges can we maintain a viable, dynamic marketplace that allows consumers access to the most cost-effective options that meet their individual needs.
To read more about these principles, read the BenefitMall Issue Brief. For blog posts, legislative alerts, pools, surveys and other resources, visit www.HealthcareExchange.com.
[1] A hybrid approach with a shared state/federal governance model for exchanges might be an optional as well.
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