Ensuring That The Health Exchanges Are Not Just An ‘Automated Yellow Pages’

As states begin to establish their own health insurance exchanges, progressive policy wonks are hoping that more governors and state legislators will follow the models established by California and Massachusetts, in which the exchanges are empowered to “selectively contract with carriers, set tougher participation criteria than the federal standards and/or negotiate price discounts in order to effectively serve consumers.” Former Massachusetts exchange head Jon Kingsdale believes that this provision is do or die — not having it “would be like telling your grocery store they have to offer every single kind of bread baked by every single bakery,” he says. “The Exchanges would be nothing more than an automated Yellow Pages.”

But a new report from National Academy of Social Insurance and Georgetown University argues that not all states can implement an active purchasing requirement in the same way. For instance, “exchanges that sit in highly concentrated insurance markets are limited in how selective they can be.” States in which the exchange represents a small part of the commercial market will also have little leverage, as will states with a sicker risk pool. These states won’t be able to actively purchase in the same was as California and Massachusetts, but they can still improve the value of coverage for enrollees, the report finds. For instance:

While an exchange in a concentrated market may have limited leverage to negotiate price discounts, they could work to recruit new market entrants or encourage smaller carriers that may be able to expand market share through an exchange. They can also focus on promoting better consumer decisionmaking and encouraging competition based on value. The exchange could also collaborate with other large purchasers to align purchasing strategies.

It’s an interesting read and one state lawmakers should be looking to and referencing to push back against the insurance industry’s attempts to water down the effectiveness of exchange-based consumer protections.