The First Step – Health Exchanges

Part of the “My Prescription” series.

I know some out there have already decided they don’t like this plan. The decision was made as their eyes rolled over the words, “Health Exchanges.” It’s not good when you lose people in your title, but I encourage those who have turned away to stick around a bit longer.

In previous posts I have detailed why employer-based health insurance is the basis of our health care system and why I think we as a workforce have evolved past employer-based health insurance. Read here and here. If we are going to consider serious reform of our health care system we need to move away from our current foundation, and health exchanges are my recommendation for doing so. 

Employer-based health insurance was how we as a society pooled people together to spread out risk, however, we know many people are left out of these pools and portability of plans is basically non-existent. The health exchanges would facilitate pooling while allowing for complete portability of plans.  The exchanges would be run by the States (could be regional as well) and would act as clearinghouses  in which insurers would compete for workers’ business while playing under standardized rules. All insurers would be required to operate within the exchanges (possible exceptions under ERISA – too complicated to explain here). Butler equates it to the stock exchange.  Neither the stock exchange nor the health exchange sells either stock or health insurance, but both provide the venue and the rules that regulate their industries.

With the exchanges in place employers would no longer sponsor health insurance meaning that they would no longer pick the available plans or if they are a small company be limited by their small workforce. The exchange would provide the pooling and spread the risk thus allowing more people entrance to the large pool insurance world. Self-employed individuals could also use the exchange making their prices equivalent to the their employed counterparts.

Further, the exchanges allow a worker to select their health plan and then to keep their insurance as they move from one job to another within their geographic area (most likely States). Now we have portability and continuous care – a huge improvement in quality of care.

The exchanges also provide the ability for the States to create risk adjustment schemes, re-insurance schemes, and/or other tactics to provide the best care for their residents.  Each exchange could set its own rules (perhaps under broad federal rules). I will talk about these possibilities in future posts, however, my point now is that the exchanges open up possibilities that are not available now.

Under this set-up employers would no longer sponsor health insurance, but they still would facilitate it.  By facilitate I mean they could still contribute to an employees plan (some dollar amount), deduct payments from payroll and adjust taxes accordingly. Employers seem to do a good job of this administrative work, and I see no reason they should stop providing this service.  Further, employers could still use their contribution to the employees plan as a way to attract workers through fringe benefits.

Ultimately, employers would no longer be sponsors, but facilitators of health insurance.    

Second step – tax reform. Aren’t you excited?

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2 responses to “The First Step – Health Exchanges

  1. Thanks for posting your article.
    I do agree with you that people need help in more equitable pooling and in continuing their coverage when switching employers.
    In addition, if people wish to switch insurers, they should be able to do so, within some reasonable time limits.

    I believe that to be affordable, that insurance needs to be financed on something other than exclusively a pay-as-you-go basis.
    In other words, when switching insurers, those with lower claims need to have some residual benefits, rather than starting all over again with a new insurer.
    To accomplish this, part of the premiums will need to go to a savings account.
    While HSAs do provide this option, they must be tied to a high deductible health plan.
    Are you familiar with VEBAs? These unique, non commercial insurers do allow participants to apportion their premiums between investments and pay-as-you-go insurance.
    And, the insurance portion allows for much innovation, as the accompanying policy need not be tied to the high deductible health plan parameters.
    Don Levit,CLU,ChFC

  2. Pingback: Now We Build « U.S. Health Care Forum

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