NCPA - National Center for Policy Analysis

Insurance Exchanges Present Tough Choices for States

September 15, 2010

States are struggling to come up with rules for health insurance exchanges they can set up under the new health care law, says Politico.

There are competing visions, however.  At the National Association of Insurance Commissioners meeting last month, commissioners were markedly divided over how best to build exchanges and which policies would most encourage insurers to cut costs while providing high-quality benefits.

  • One of the chief sticking points is whether the marketplaces would benefit from an outside insurance market.
  • Some argue that states should bar insurance sales outside the exchange, to prevent adverse selection against the more regulated plans.
  • But others see a future with insurers selling outside the new marketplace, to allow consumers the greatest number of health care choices.
  • Some have argued for a sort of middle ground: an insurance market outside the exchange subject to the same rules and regulations.

States will also have to grapple with how active a role they will play in deciding who qualifies to sell on the exchange.

  • California, the first state to pass health exchange legislation, opted for a system in which the state can selectively contract with insurance providers, a provision that the California Association of Health Plans, an insurance trade organization, opposed.
  • The bill, which has passed the Legislature, still awaits Gov. Arnold Schwarzenegger's signature.
  • States with a smaller population, like Alaska, meanwhile, are questioning whether they have enough of an insurance market to support an exchange in the first place.

Source: Sarah Kliff, " Insurance Exchanges Present Tough Choices for States," Politico, September 14, 2010.

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