Would Some Consumers Be Better Off If States Didn’t Establish Their Own Exchanges?

The Hill’s Sam Baker has an interesting piece examing the progress states have made in establishing health insurance exchanges before the 2013/2014 deadline. He concludes that the new market places are not being established fast enough, putting “state legislatures are at risk of handing over the central component of the reform effort to the federal government, which will set up the exchanges for states that fail to do so”:

Governors in 10 states have signed laws that establish an insurance exchange — a new marketplace where individuals and small businesses will be able to buy insurance.

I think that a year ago, many of us who work with states would have predicted that more states would have passed legislation,” said Anne Gauthier, senior program director at the National Academy of State Health Policy. “Although exchanges are about as bipartisan an idea as perhaps exists in the health policy world … politics has played very heavily at the state level.”

Establishing an exchange is a mammoth undertaking, and states don’t have a lot of time to complete the task.

The exchanges must be up and running by 2014. But it’s in 2013 that the Health and Human Services Department will evaluate each state’s progress and determine where it needs to step in with a federally run “fallback.” […]

But even in many of the conservative states that haven’t passed an exchange bill, Gauthier said, there’s still a strong desire to retain control of the program. And HHS officials have unequivocally said they want the states to create their own systems.

The exchanges, it’s worth reiterating, were actually the brainchild of the Heritage Foundation and are generally built on the conservative construct of competition as means to lowering health care costs. The Republican governors who are resisting implementing the measure are doing so out of political consideration — Obama included the idea in his health care reform law and so it must therefore it must be bad — but will have a hard time explaining why allowing the federal government to run the exchange makes more ideological sense than designing a state-based marketplace.

As for what would make for better policy, that’s unclear. The conservative states are more likely to adopt a model that would not allow the exchange to actively negotiate with insurance plans and eschew strict conflict of interest rules that preventing insurers and other health care sectors from having too much influence over the operations of the new structure. And if the federal government provides a more consumer friendly alternative, then state residents could actually be better off if their governors left the exchanges to HHS.