EBRI's report is neutral on whether an exchange should or should not be formed, but instead lays out the various interdependent policy components that are essential for the success of such a program. It discusses issues that must be addressed when designing an exchange in order to reform the health insurance market and also examines state efforts at health reform that use an exchange.
"For both employers and workers, the implications are enormous," said EBRI's Paul Fronstin, who co-authored the study with Murray Ross of the Kaiser Permanente Institute for Health Policy. "Will employers provide a fixed contribution for the purchase of insurance through an exchange? Would that be large enough to purchase coverage? Would it be flat or vary by workers' health status, age, and/or marital status or the presence of children? Would it be taxed?" These remain open questions, he noted.
Fronstin notes that the large majority of Americans - about 62 percent of the U.S. population under age 65 - currently are covered by an employment-based health plan. About 18 percent of the working-age population depends on publicly subsidized health plans, 7 percent buys coverage individually, and 17 percent is uninsured.
Among the report's key points:
- Risk vs. price competition: The basic component of managed competition is the creation of sponsors that act as collective purchasing agents for groups of individuals. These sponsors would negotiate with insurers or health plans and offer exchange participants a menu of choices among different plans. Ultimately, the goal of a health insurance exchange is to shift the market for health insurance from competition based on risk to competition based on price.
- Adverse selection and affordability: Among the issues that need to be addressed if an exchange that uses managed competition has a realistic chance of reducing costs, improving quality, and expanding coverage: Everyone needs to be in the risk pool, with individuals required to purchase insurance or face significant financial consequences; effective risk adjustment is essential to eliminate risk selection as an insurance business model - forcing competition on costs and quality; the insurance benefit must be specific and clear - without standards governing cost sharing, covered services, and network coverage there is no way to assess whether a requirement to purchase or issue coverage has been met; and subsidies would be necessary for low-income individuals to purchase insurance.
- The public plan battle: The public plan option is shaping up to be one of the most contentious issues in the health reform debate. Proponents also believe that the creation of a public plan is necessary to drive private insurers toward true competition. Opponents view it as a step toward government-run health care and are wary of cost shifting from the public plan to private insurers.
