On Oct. 1, government insurance exchanges started operating. Some states built their own exchange (14). Some states partnered for certain administrative services with the federal government (17). Some states, wanting no part of the Patient Protection and Affordable Care Act known as ObamaCare – Georgia included – decided to let the feds build the exchange (19).
We are entering a new and confusing world of Health Insurance Exchanges, also called Insurance Marketplaces. There are state, federal and private insurance exchanges. There are single and multiple carrier exchanges. There are agent/consultant operated, association operated, and insurance carrier run exchanges. The word “exchange” has even given way to the term “marketplace.”
What is a consumer to do? Where to turn?
The development of marketplaces, both government and private, is part of an evolution that will change the way insurance is bought and sold. It is a new way of connecting products with customers.
The Affordable Care Act (ACA) has few features that will actually make insurance more affordable. Government studies and industry experts have indicated that coverage mandates, limited premium classifications, added benefits, single risk pools and price compression will raise premiums more rapidly than if the law had never passed. It requires insurers to “community rate” their products. That is, individuals and small groups will not get direct premium reductions for healthy activities, healthy histories, or healthy lifestyles.
The government exchanges are for individual and fully insured small groups. Larger employers may be included after 2017. Government exchanges are likely to be used mainly by those qualifying for federal subsidies. Government exchanges are likely to attract high-risk and high-cost claimants. The government exchanges will use government-paid “navigators” rather than licensed agents. They are not expected to offer supplemental products, life insurance, property and casualty or other insurance-related products and services.
Some private marketplaces have been around and developing for many years. Recently, private marketplaces have grown as an alternative to government exchanges. They are the free market solutions for access to coverage and cost control. They will offer individual and group products that emphasize wellness and treatment compliance for those under medical care. Patient engagement and health literacy are more likely to emerge through products and services offered through private marketplaces than government exchanges.
Private marketplaces will provide a transition from employer-based insurance to individual-centered or consumer-centered insurance. Large and small employers will be able to purchase health insurance through a private marketplace. Private marketplaces will serve fully insured and self-insured plans, early retirees and retirees. In most marketplaces, employees will be able to choose individual health plans from those offered by participating insurers.
This is the beginning stages of a major market revolution. Government run small group exchanges (SHOP exchanges) as originally promised already have been delayed until 2015. Government exchanges face a daunting task: connecting insurance carriers for premiums and coverage with IRS tax records for subsidies, meeting needs of customers, and providing services for those eligible for other government insurance programs of Medicaid, CHIP (PeachCare) and Medicare. Expectations are high and thus far delivery and technology has been questionable. Privacy, data security and accuracy at each stage will be critical to public acceptance of government exchanges.
As private marketplaces become available, each will be a little different and offer varying levels of products and services. Ultimately, the success and failure of each marketplace’s products, services and distribution model will lead to consolidation with better products, services, convenience, help and information for the consumer. In the end, more product competition and price transparency will lead to more people being insured and lower insurance costs will prevail. This is the way free markets create affordable products and services that consumers want to buy.
For those who want the Affordable Act to succeed, the results to date are not promising of better tomorrows. For those wanting the failure and repeal of ObamaCare, be careful of what you ask for. Government failures usually result in more government solutions to fix the problems created. For those already pointing political fingers at who is to blame remember the old saying, “Every system is perfectly designed for the outcomes achieved.” The country voted, the courts ruled and now we may have to literally live and die with the results. Welcome to confusion.
(Ronald E. Bachman FSA, MAAA, is a Senior Fellow at the Georgia Public Policy Foundation, an independent think tank that proposes market-oriented approaches to public policy to improve the lives of Georgians.)