Exchange expanded coverage to small businesses in Utah

Since passage of the Patient Protection and Affordable Care Act in March 2010, the call from those on the right has been “Repeal and replace!” While much effort has been focused on the repeal effort, alarmingly little has been said regarding what ideas the GOP would offer up as a replacement.

One of the most sweeping and controversial elements of the law is the requirement that all states establish a highly prescriptive statewide health insurance exchange by January 2014.

To be clear, state health insurance exchanges, as originally conceived, were a conservative idea; they were supposed to serve as “farmers’ markets”—centralized, easy-to-access locations where insurance carriers could come and display their wares and where consumers could make comparisons based on price and quality and then purchase the plan that best suited their individual or family circumstances. The Affordable Care Act, however, took that good idea, loaded it up with controversial mandates, generous subsidies, and burdensome regulations; then it passed these bureaucratic nightmares on to the states.

Market-oriented exchange

Prior to the advent of the Affordable Care Act, two states—Massachusetts and Utah—established state insurance exchanges. The two models share a number of similarities but, functionally speaking, they are as different as their respective state politics.

In Utah, the path to reform began with the notion that the invisible hand of the market, not the heavy hand of government, was the best and most appropriate means whereby inefficiencies in the insurance market, as well as issues involving cost and access, could be addressed.

Initial efforts involved establishing the defined contribution market (which runs parallel to the traditional small group market) and creating the Utah Health Exchange. Employers who participate in the defined contribution market give workers a specified dollar amount rather than a specified (or “defined”) benefit plan. Workers then use those dollars to shop in the exchange for a plan that best fits their needs. A defined contribution approach to health insurance puts the consumer directly in control of the health benefit, while preserving all of the federal tax advantages that are currently only available through traditional employer-sponsored arrangements.

This approach is analogous to the movement in pensions—from the traditional defined benefit pension program to an employer’s defined dollar contribution toward an employee’s 401(k) or similar retirement account.

Similar to the movement in employee retirement plans, the shift to defined contribution arrangements for health care empowers workers by giving them ownership of their health insurance and a potential for portability.

Initial outcome—more covered

Consumers shopping in the exchange can select from more than 100 insurance plans. On-board consumer selection tools help shoppers narrow down that list to between five and ten choices, based on consumer needs and preferences.

As of May 2012, the Utah Health Exchange has about 6,500 participants representing nearly 280 small businesses in the state. Of those small businesses, roughly 30 percent did not previously offer coverage to their employees; thus, as the exchange continues to grow, it has the real potential to reduce the number of uninsured.

It should be noted that the Utah Health Exchange is not a regulatory entity, did not result in the establishment of a new state agency, and did not require any new mandates or taxes. Furthermore, the annual budget to establish and operate the exchange has never exceeded $700,000. That alone should give Republicans reason to rejoice!

Advice to the GOP

Uncertainty abounds as we wait for both the Supreme Court decision and the outcome of the 2012 elections. As a result of either (or both), Republicans may very well find themselves being forced to own health care reform in a way they haven’t had to do up to this point.

If I could be so bold as to offer up a bit of advice to Congressional Republicans, it would be this: Return to your roots! Reclaim your tried and true principles of federalism, consumerism, and competitive markets.

Practical wisdom and good public policy dictate that the GOP allow and encourage states to be the creative laboratories of democracy they were intended to be. Utah continues to serve as an excellent reminder of state-based innovation.

Regardless of how one feels about the Affordable Care Act, the one way in which it has been absolutely successful is in making health care reform a front-burner issue for many Americans. The last time we witnessed anything close to this level of awareness on this issue was in the early 1990s during the battle over “HillaryCare”.

In the aftermath, Republicans in Congress failed to come up with new solutions to old problems and, as result, once again we find ourselves fighting on this front. Let’s hope Republicans have learned their lesson.