Both the House health reform bill, H.R. 3962 (Affordable Health Care for America Act), and the Senate health reform bill, H.R. 3590 (Patient Protection and Affordable Care Act), include provisions establishing one or more health insurance marketplaces (exchanges). The exchanges would serve as an organized and transparent marketplace designed to facilitate access to, evaluation of and purchase of qualified health insurance plans by individuals and small businesses. Premium subsidies would be available through the exchange, and benefit packages would be structured in standardized tiers. An exchange would seek to create a large enough risk pool so that competition among insurers would increase not only with respect to pricing but on quality and service aspects as well. Insurance market reforms in both bills would disallow preexisting condition exclusions and impose medical loss ratio requirements.
There are key differences between the House and Senate proposals. The House bill would create one national exchange overseen by a new federal agency, the Health Choices Administration (HCA), with an opt-out provision for states under certain circumstances. The HCA would oversee the health plans and premiums charged for policies available through the exchange. Under the House bill, the exchange would be the exclusive marketplace for all individual (non-group) policies, other than grandfathered policies. Insurers would be required to bid to participate in the exchange, with the HCA able to negotiate terms before allowing a plan to participate in the exchange. By contrast, the Senate bill provides for each state to establish and administer its own exchange, subject to compliance with minimum federal standards, with federal intervention if a state does not provide an exchange.
What’s at Stake
The exchanges will be at the crux of revamping the individual and small business markets. Whether there is a single national exchange or separate state exchanges will have significant implications for providers, payors and consumers. The House proposal could offer greater economies of scale and potential efficiencies for products offered across state lines, but would represent a significant shift from how insurance is currently regulated at the state level. The Senate proposal would retain the benefit of the local market knowledge of the states and would preclude an additional layer of federal regulation.
Steps to Consider
Understand the impact of the exchanges on structure and oversight of the insurance market, evaluate current plans and prepare for refinements needed to transition to new exchanges.