Is a ‘free market health exchange’ a smart policy alternative or contradiction in terms?
When Congress originally passed the “Patient Protection and Affordable Care Act,” the plan was for the federal government to set up a national “health exchange” – a single government-run “market” for health insurance. One small problem: the feds didn’t have the resources to do it. So they made a virtue of necessity and “allowed” states to set up their own health exchanges. Is it possible, then, to create a “market-friendly” health exchange within federal guidelines? Hardly.
- States have very little “flexibility” in how they set up their own health exchanges. Under the federal law, states may only introduce tighter regulations for the health plans offered within their exchanges, in addition to those the federal government has already mandated. In essence, state exchanges will act as the federal government’s enforcers.
- Under a state-based exchange, states may administer and fund their own exchanges, design their own websites, set their own call center hours, establish their own board membership eligibility guidelines, and decide whether to create a new agency or empower a new agency or nonprofit with the same service requirements.
- The one example of a “free market health exchange” – the one enacted in Massachusetts in 2006 – has been an unmitigated disaster, with a rapid, unexpected rise in premiums across the state, failure to provide much-promised universal coverage, and reported 30-45 day wait times for appointments with primary care physicians.
- Similarly, Utah’s allegedly more “market friendly” health exchange has shown poor results, with only 112 small businesses and 2,793 individuals enrolled in its first two years of existence. The exchange drove up premium prices for plans offered both in the exchange and in the private market.
- But the federal law wouldn’t allow the Massachusetts and Utah models anyway. It doesn’t empower states to decide which policy reforms will combat the particular challenges of their insurance markets. Instead the law requires that states adopt whatever “one size fits all” approach to market intervention that federal bureacrats decide is best.
- Most states are dominated by a single health insurer that controls more than half the market. In South Carolina’s case, one company owns 65 percent of the market – largely because governmental regulations cripple smaller competitors. The federal law’s onerous new regulations will make the insurance market even less competitive than it is now.
This material should not be construed as an attempt to aid or hinder the passage of any legislation.