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Buying Health Insurance Post Reform

September 28, 2009 - by Donny Shaw

One of the things just about every member of Congress and President Obama can agree on for health care reform is creating new “exchanges” where people can comparison shop for insurance plans. Basically, these “exchanges” will be websites where people can plug in their zip codes and some basic information about themselves and get back a list of plans that are available to them, with prices and services laid out side-by-side in a standard format. Think Travelocity.com for health insurance.

Two states have already set up exchanges. Massachusetts was the first to set one up in 2006 under Governor Mitt Romney. You can see it here. If you want to try it out, you’ll ned a Massachusetts zip code. Use mine: 01084. Utah recently set up an exchange as well. Actually, they set up a series of exchanges, run by private companies, that are all centralized on a government website, here. For sampling purposes, the zip code for Salt Lake City is 84101.

Living in Massachusetts, I know a bit about the exchange here and how it’s different in a few key ways from what is being proposed by Congress. First, the Massachusetts exchange doesn’t have any regulatory characteristics, whereas the new federal exchange would. The proposals in Congress would only allow insurance plans into the exchange that met new consumer protections criteria. Among these, a company participating in the exchange wouldn’t be allowed to deny coverage because of a pre-existing condition, they would have to provide parity between mental health coverage and physical health coverage, and they would have to cover, at minimum, a list of basic services. In Massachusetts, the exchange is really just a marketplace; it doesn’t guarantee the quality of coverage it sells. For that, you still would need to weed through the fine print of the plans (probably a good idea anyways).

The second big difference is that Massachusetts doesn’t have a public plan on the exchange. You choose only between a series of private plans – Blue Cross Blue Shield, Fallon, Aetna, etc. All bills in Congress besides the Senate Finance version would set up a government-run insurance plan to compete against the private plans on the exchange. The Congressional Budget Office has estimated that the government would be able to offer the public plan with a premium about 10 percent cheaper than similar private plans. The idea behind the public option is to provide a strong competitor to other plans on the exchange in order to encourage them to lower their premiums to stay competitive.

The Hill had a piece yesterday on some discussions lawmakers have been having with a company, eHealth, Inc., which is competing to help build the proposed federal exchange. The company, which operates an exchange as part of the Utah system, doesn’t think the new federal exchange system would bring down prices if there is no public option included.

John Desser, the vice president of public policy and government affairs at eHealth, however, puts that sunny projection into some context.
 “I wouldn’t expect premiums to come down; you’re more likely to see a reduction in inflation."
 
Desser said he also is not aware of premiums coming down in Utah or Massachusetts, which already has statewide exchanges. (Utah has had one for a few months and Massachusetts is two years into its reform.)

 
The main value of the exchanges, as Dresser of eHealth sees it, is helping people get insurance quicker:
 

Desser also said that statewide exchanges would arise on their own even if Congress didn’t spent $775 billion to a trillion dollars to overhaul the nation’s healthcare system. He predicted if the legislative push collapsed consumers would see as many as six states set up health insurance exchanges in the following year.
 
But he said that government mandate for state insurance exchanges will certainly cause millions of Americans to enroll in these clearinghouses faster than if policymakers let the market takes its natural course.

[…]

If Congress passes a law that requires all Americans to sign up for health insurance and bars companies from discriminating on the basis of pre-existing conditions, as is expected, applying for a health policy will become much quicker. Insurance companies will no longer spend weeks assessing the risks of insuring individual patients.
 
“It will be a race for market share,” said Desser.
 
Consumers who turn on their computer and click on a state-run health exchange or a site created by eHealth will find out in minutes what government subsidies they qualify for and the cost of their monthly payments. They’ll even be able to print out a new insurance card and go to a doctor that same day.

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