ED­I­TO­RIAL: States opt­ing not to start ex­changes may be hurt­ing own ci­ti­zens

States may be hurt­ing their own ci­ti­zens by let­ting feds run ex­changes

Modern Healthcare - - NEWS - MER­RILL GOOZNER

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There’s never a short­age of ironies when it comes to health­care re­form. The lat­est comes from the de­ci­sion by more than two dozen states to opt out of start­ing their own health in­surance ex­changes (the ex­act num­ber won’t be known un­til af­ter this goes to press). Not sur­pris­ingly, most of them have con­ser­va­tive Repub­li­can gov­er­nors and are in the Deep South, the Great Plains and the Mid­west.

What­ever hap­pened to states’ rights? You’ll re­call that dur­ing the health­care re­form de­bate, House lib­er­als pushed for a sin­gle na­tional ex­change with a pub­licly run in­surance op­tion to com­pete with pri­vate in­sur­ers. Be­sides want­ing to ex­pand the pub­lic sec­tor’s role in health­care fi­nance, they saw a na­tional ex­change as a boon to ar­eas that suf­fer from a lack of health in­surance com­pe­ti­tion.

Not only was the pub­lic op­tion re­jected, so was the na­tional ex­change. Ul­ti­mately, more con­ser­va­tive Democrats in the Se­nate such as Sen. Max Bau­cus of Mon­tana (Repub­li­cans mostly ig­nored the de­bate) thought that when it comes to sell­ing in­surance, it was bet­ter to let states de­ter­mine the best so­lu­tion for what ul­ti­mately is a lo­cal mar­ket driven by lo­cal con­di­tions.

Per­haps gov­er­nors and state leg­is­la­tures now opt­ing out are think­ing that the fed­eral government will fall flat on its face with in­com­pe­tent bu­reau­crats fail­ing to get their act to­gether to de­velop an ex­change that can op­er­ate in mul­ti­ple states with­out help from lo­cal au­thor­i­ties. There’s no rea­son to think that will be the case.

The fed­eral government al­ready has ex­pe­ri­ence of­fer­ing health in­surance op­tions in ev­ery state. It’s called the Fed­eral Em­ploy­ees Health Ben­e­fits Pro­gram, where the government’s more than 2 mil­lion work­ers and their fam­i­lies pick among pri­vate firms that com­pete for their busi­ness. The pro­gram is so suc­cess­ful that its ex­pan­sion was briefly con­sid­ered as one way to ex­tend cov­er­age to the unin­sured.

More­over, there are ef­fi­cien­cies of scale in op­er­at­ing a sin­gle na­tional ex­change. De­vel­op­ing one sin­gle In­ter­net-based in­ter­face where in­di­vid­u­als and busi­nesses can go to learn their op­tions makes more sense than hav­ing 50 states rein­vent­ing the wheel. It cer­tainly makes mar­ket­ing sim­pler. Mas­sachusetts’ highly suc­cess­ful Health Con­nec­tor paved the way, of course, and is freely avail­able to the feds or any state that wants to use it. So what’s lost in let­ting the fed­eral government take over the job? Iron­i­cally, it is what MIT health econ­o­mist Jonathan Gru­ber, who helped de­sign both the Bay State and fed­eral re­form laws, calls the eas­i­est and most fun part of in­surance re­form: de­sign­ing and choos­ing the plans that will be made avail­able to con­sumers and small busi­nesses that use the ex­changes.

The Pa­tient Pro­tec­tion and Af­ford­able Care Act calls for cre­at­ing a menu of choices for con­sumers de­pend­ing on the level of ben­e­fits: dubbed bronze, sil­ver, gold and plat­inum. States can choose whether to stan­dard­ize op­tions within each level or al­low vari­a­tions that are equal in ac­tu­ar­ial value. Mas­sachusetts has cho­sen a mix of those ap­proaches: there are two vari­a­tions of the high-end plans but only one in the more ba­sic plans that many low- and mod­er­ate-in­come peo­ple will likely choose.

States also can choose to be ac­tive par­tic­i­pants in the mar­ket­place by lim­it­ing the num­ber of in­sur­ers who can par­tic­i­pate within each cat­e­gory. Pre-screen­ing al­lows states to avoid the con­fu­sion that comes with a pro­lif­er­a­tion of choices such as what hap­pened when Medi­care’s drug ben­e­fit pro­gram was in­tro­duced in 2004. Cal­i­for­nia has taken that route.

There was wis­dom in al­low­ing states to go their own way. Given the dif­fer­ences in re­gional health­care de­liv­ery and in­surance mar­kets, tai­lor­ing ap­proaches to lo­cal con­di­tions should give lo­cal health in­surance con­sumers the most choice in the least con­fus­ing man­ner. By turn­ing it over to the feds, the only peo­ple those state gov­ern­ments po­ten­tially hurt are their own ci­ti­zens.

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