The Differences Between The House And Senate Exchanges

As lawmakers work to reconcile the House and Senate health care bills, health insurance exchanges — regulated online stores for insurance — have become a central sticking point for negotiators trying to iron out the differences in the two health bills and produce a single unified bill before the State of the Union address in early February. In addition to fighting for higher affordability standards and excise tax thresholds, House leaders are reportedly urging their Senate counterparts to establish a national federal exchange that combines the individual and small group markets into one insurance pool and a single exchange.

The House legislation establishes a Health Choices Administration (HCA) that “would have primary responsibility for administering the regulatory and subsidy programs established under the bill.” Conversely, the Senate bill “maintains separate insurance pools for individual and small group, and separate individual and small group Exchanges in each state.” The Senate legislation does allow states to merge the small and individual group markets and create their own basic plan for residents with incomes from 133 to 200% of the federal poverty level.

On Friday, during an event sponsored by the Alliance for Health Reform, Washington & Lee University Professor Timothy Jost urged Democratic negotiators to abandon the Senate’s exchange provisions and adopt the House bill’s more centralized approach. Jost laid out the differences in the two approaches and concluded that a single national exchange would eliminate inefficiencies, reduce insurers’ (and states’) ability to game the system and ensure greater government oversight of the new market place.

Watch a compilation:

House Bill Senate Bill
National exchanges. States (like Massachusetts) can opt-opt out and create their own exchanges. State-based exchanges. States would have to pass a law establishing the exchange and would be responsible for running it. If a state fails to establish an exchange by January 2014, the federal government could build it.
A single national exchange would create a larger risk pool that could lead to lower costs and greater administrative efficiencies. All 50 exchanges would operate independently. States would receive seed money to establish their exchanges but they would have to fund and maintain the operation using their own funds and would presumably raise that money from a tax on insurers.
Uniform implementation, states would not lag behind. States facing budget problems or political interfighitng would be slow to implement the exchange or effectively regulate the insurance product they sell.
To eliminate adverse selection and prevent insurers from attracting the healthiest applicants outside of the exchange, all nongroup policies have to be sold inside the national exchange. The nongroup market can exist outside of the exchanges. Insurers that participate in the exchange would be required to market the Silver and Gold tier plans in the exchanges but would be exempt from marketing the Bronze plan within the exchange. Insurers could therefore market the lower-cost/high deductible Bronze plan outside of the exchange or stay out of the exchanges altogether and attract healthier people into the non-exchange nongroup market.
The exchange can negotiate premiums, administrative costs with insurers, selecting only the most prudent of policies. The exchanges can take an insurers’ premium history into account. Some discretion for the exchanges to negotiate with plans around premiums.

Jost also expressed concern that a state-based model would allow conservative states — particularly those that are interested in exempting themselves from reform — to drag their feet on implementing an exchange and hamper the success of the effort.

Jon Kingsdale, Executive Director of the Massachusetts Commonwealth Health Insurance Connector Authority, argued in favor of the Senate provision. Kingsdale emphasized that the exchanges would be primarily responsible for selling insurance coverage to the uninsured and explained that local exchanges could better address the unique needs of a particular region. Kingsdale also criticized the reform legislation for requiring small businesses or individuals participating in the exchange to send their payments to the specific insurers rather than the exchange itself. Kingsdale predicted that this would create a insurmountable administrative burden for small businesses and could keep them out of the exchange.


EJ Dionne reports that the final health care bill may include a national insurance exchange:

Over the last week, I’ve been talking with key figures in the House, Senate and White House, and the outlines of a deal are becoming reasonably clear. The public option is, alas, dead. But the idea of setting up a national insurance exchange — alongside state exchanges — where the uninsured can purchase coverage is very much alive. The House is demanding this as the price for giving up on the public plan, and a national exchange would provide for much more consumer-friendly regulation of health insurance policies.

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