First In The Nation: California Begins To Implement Health Reform Exchanges

David Gorn reports that The California Health Benefits Exchange board met for the first time yesterday, “the initial big step toward implementing the first reform-prompted insurance exchange in the nation.” In October, California became the first state to establish health care exchanges under the Affordable Care Act, following a Massachusetts’ approach of allowing the Exchange to bargain with insurance companies on behalf of consumers.

At yesterday’s meeting, the all-volunteer board selected an interim chair of the exchange board, an interim administrative director, and appointed a search and recruitment committee to find an executive director. Board members also stressed the importance of ensuring that the Exchange serve as an active purchaser of health insurance, emphasizing the need for “choice, value, and service.” The Exchange will be able to negotiate prices for a large volume of individuals and secure the kind of group discounts that large employers now enjoy. Like the exchanges operating in Massachusetts, California will have the authority to exclude inefficient insurers from the market and require issuers to meet certain minimum standards.

“The success of the Exchange will depend in large part on it’s ability to build on California’s history as an active purchaser in other areas of health and importing that experience to the exchange,” Peter Harbage — a health policy expert who attended the meeting — told me, stressing that California is in fact the only state that selectively contracts with hospitals through its Medicaid program. Harbage estimates that this kind of bargaining has saved the sate approximately $15 billion since 1982. “The exchange is a chance to build on that history and find ways to create an even more effective purchaser,” he said.

Progressives see California’s Exchange as model for the nation, but whether other states will adopt the active purchaser structure will likely depend more on political ideology than past models of success. While blue states may follow California’s lead, red states will most certainly prefer the approach championed by Utah, where consumers can compare a wide variety of health plans sold by any insurers that want to participate. Health advocates have dubbed Utah’s exchanges a “flee market,” in which customers are overwhelmed by a myriad of options — many of which provide inefficient or poor quality coverage. It “would be like telling your grocery store they have to offer every single kind of bread baked by every single bakery,” Jon Kingsdale, the former director of the Massachusetts Connector Authority has said. “The Exchanges would be nothing more than an automated Yellow Pages.”