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National exchanges vs. state exchanges

The post below names off five things that the Senate and the House could do to improve the health-care bill. Chief among them is to snatch the national exchanges from the House legislation and include them in the final product. Because the column had a word limit, I couldn't go into as much granular detail as I'd normally like. But I'm not sure that the "national exchange" vs. "state exchange" language that's developed around the issue is really the best way to understand it.

What the House bill has is not so much national exchanges as state exchanges that are run and regulated by the federal government unless the state prefers to take on the responsibility itself. The Senate bill, by contrast, has state exchanges that are run and regulated by the states, unless the states can't do it and the federal government has to step in. In the House bill, federal administration is the default. in the Senate bill, state administration is the default.

For more on this, see Jon Cohn and Igor Volsky. But in case you don't do that, I'm going to steal Volsky's table, as it's useful for understanding this:

House Bill Senate Bill
National exchanges. States (like Massachusetts) can opt-opt out and create their own exchanges. State-based exchanges. States would have to pass a law establishing the exchange and would be responsible for running it. If a state fails to establish an exchange by January 2014, the federal government could build it.
To eliminate adverse selection and prevent insurers from attracting the healthiest applicants outside of the exchange, all nongroup policies have to be sold inside the national exchange. The nongroup market can exist outside of the exchanges. Insurers that participate in the exchange would be required to market the Silver and Gold tier plans in the exchanges but would be exempt from marketing the Bronze plan within the exchange. Insurers could therefore market the lower-cost/high deductible Bronze plan outside of the exchange or stay out of the exchanges altogether and attract healthier people into the non-exchange nongroup market.
The exchange can negotiate premiums, administrative costs with insurers, selecting only the most prudent of policies. The exchanges can take an insurers’ premium history into account. Some discretion for the exchanges to negotiate with plans around premiums.

By Ezra Klein  |  January 11, 2010; 5:31 PM ET
Categories:  Health Reform  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   StumbleUpon   Technorati   Google Buzz   Previous: Five ways the House and Senate could negotiate out a better bill
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Much more important than national vs. state is whether the exchange will be the sole source for the nongroup market. In the House it will and therefore has a chance of succeeding. In the Senate it won't and therefore is likely to fail due to adverse selection as other similar exchanges have such as PacAdvantage (HIPC) in California.

Posted by: micahdw | January 11, 2010 5:49 PM | Report abuse

Wow, when you put it this way, the Senate exchange kind of looks awful.

Posted by: cog145 | January 11, 2010 6:01 PM | Report abuse

Hey, Ezra

I think one other thing you forget about the Exchange is the ability to cherry-pick on benefits. The Senate bill allows insurance companies to offer benefits outside of the minimum benefits package once they're reached the tier's minimum actuarial value. The House bill only allows benefits outside of the minimum benefits package to be offered on the Premium-Plus tier, and that's once the benefits at the level of coverage from the Premium Tier (0.95 AV) have been met.

Posted by: BradGabel2002 | January 11, 2010 9:03 PM | Report abuse

Brad makes a really good point that I hadn't thought about before. We've got to keep mainstream plans as plain vanilla as possible or the exchanges will not work.

Posted by: bmull | January 11, 2010 9:28 PM | Report abuse

@bmull keeping the plans vanilla is nearly impossible- as fighting the lobby for specific diseases or cures is a losing battle. Our democracy is a terrible method for devising a health plan.

The Bronze/Silver/Gold strategy seems bizarre. Why would the high deductible plan be "bronze" when it is what the most affluent would want? In a logical system, the plan that covers the most should high deductible, and the bronze plan should cover fewer of the multi-million dollar treatments, but pay for the basics with low co-pays...

Posted by: staticvars | January 11, 2010 10:24 PM | Report abuse

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