NCPA - National Center for Policy Analysis

State Health Exchange Will Slash, Not Boost, Choice

September 10, 2010

Unless repealed, the new health reform law will require every American not dependent on government health plans like Medicaid or Medicare, or enjoying employer-based benefits, to purchase health insurance in a state-based "exchange" as of January 2014, says John R. Graham, director of health care studies at the Pacific Research Institute.

Massachusetts provides an example of what to expect from these exchanges:

  • An April 2006 law created an exchange called the Commonwealth Connector, which deploys a politically appointed board to limit people's choice of coverage.
  • Not surprisingly, limited choice means higher costs.
  • Economists John Cogan and Daniel Kessler of Stanford University, and R. Glenn Hubbard of Columbia University, found that premiums in Massachusetts increased by 6 percent more than in the rest of the country, and 14 percent more for small businesses, between 2006 and 2008.

California's Legislature has proposed an exchange similar to Massachusetts':  

  • Its most important power would be to "selectively contract" with insurers to offer policies in the exchange. This is fundamentally different from traditional insurance regulation, which concerns solvency, fraud and good-faith claims processing by insurers.
  • The exchange's bureaucrats would choose the policies available to Californians that Obamacare will force into the exchange.
  • Worse, the California exchange would persist even if Obamacare is repealed.

Most of us throughout the country will be facing exchanges like Massachusetts' and the one proposed in California, says Graham.  Indeed, John Goodman, president, CEO and Kellye Wright Fellow with the National Center for Policy Analysis concluded that any household earning less than $80,000 annually will lose its employer-based benefits and be driven into an exchange.

Source: John R. Graham, "State health exchanges will slash, not boost, choice," San Francisco Examiner, September 9, 2010.


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