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State vs. National Exchanges – Why it Matters

Does it matter whether health insurance exchanges are state-level or national? I used to think that it wasn’t a major issue, but my opinion has changed.

During the health reform debate early in 2009, I thought that other exchange design issues were more important than whether they are organized at the state or national level. In my view, who is eligible to join (all small business employees or just those who receive subsidies?), whether the exchange is the exclusive market for individuals and small groups, and how the exchange will be protected from an adverse selection “death spiral” are critical design features and will determine whether the exchanges are successful.

It seemed to me that the arguments put forward by advocates of a national exchange were not compelling. The most common argument was that a national exchange was needed in order to gain sufficient size, which would supposedly give the exchange more bargaining power with health insurers. But I always thought that size was more important at the local level. Health insurers negotiate provider contracts locally, not nationally, and they gain leverage based on their size locally regardless of how big they are nationwide. In addition, the “bargaining power” argument is relevant only if the exchange is negotiating rates with insurers. In an “all comers” model, the exchange isn’t negotiating rates; it relies on healthy competition among insurers to drive down premiums.

There is another argument, however, for a national-level exchange. A problem with state-level exchanges is the likelihood that they would be different from each other in variety of ways: participation rules, quality standards, enrollment processing, payment coordination, management effectiveness, etc. In other words, they would be non-standardized, and this would create a serious barrier for participation by large, multi-state employers. This isn’t an immediate problem, since the current health reform bills permit only individuals and employees of small employers to use the exchange in the near term. But the lack of standardization would effectively limit the exchanges to these groups for the long term. Most large, multi-state employers would look at the patchwork of state-level exchanges and decide that it wouldn’t be worth the hassle. (One of the reasons that these employers fiercely defend ERISA’s federal preemption of state insurance regulations is the administrative complexity caused by the differences in state laws.) If the exchanges were administered nationally, however, some large employers might seriously consider participating.

One of the major goals of the current reform bills is to put in place the framework for an effective health insurance system. If the framework is robust and flexible, we can make improvements and allow the system to evolve. If we get it wrong, however, a flawed framework can block the evolution. We don’t have to decide right now if we want the exchanges to completely replace the employer-based system in the long run, but shouldn’t we at least give large employers the option to use the exchange if it makes sense to them? We can do that with a nationally administered exchange; it won’t work with a 50 state approach.

(Note: I should be clear about definitions. This is not a single nationwide exchange including only insurers who have provider contracts throughout the U.S. It is a nationally administered exchange, with insurers choosing to participate in selected locations. There could be local administrative organizations to which the national exchange administrator could delegate certain tasks, e.g., health plan certification, coordination with state Medicaid programs, etc. There would be some national insurers in the exchange, of course, but it would also include insurers who have only a local or regional presence. People would have a choice among several national insurers as well as the local insurers that participate in their area. This is the model used successfully by FEHBP and nearly all large, multi-state employers.)

Bill Kramer is an independent health care consultant, focusing on health care management, finance and public policy. Bill served as a senior executive with Kaiser Permanente for over 20 years, most recently as Chief Financial Officer for Kaiser Permanente’s Northwest Region. More information about Bill may be found at his website. You can read more of his commentaries on health care management and policy at his blog, Now’s the Time, where this post first appeared.

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  1. To show the people of the United States that there is a plan to cover the sick and the poor, but to get Government Officials to see is a concept alone.
    To help cover the sick and the poor is a FASC Concept that states that to build a Health Care Forum within our Government Institution is a Peoples right to do so and this is Protect Under the Constitution as a Human and Civil Right. So in plan words if the poor and the sick could only afford to pay $5.00 to $10.00 per month this would to bring a balance toward the broken tax system, to add up this number 32 million to 100 million sick and poor people x $5.00 per month. This will place back into the system $116 million $to 500 million dollars per month. The cause and effect of this will reduce the purposed Health Care Tax Forum, to bring about a reduced effect so not to a over burden a system. Take my faith in this and almost all the poor and sick would be happy to pay in and help rebuild the United States failed tax system. Also To bring about a balance of trust lost between the people and Officials.
    Under a Federal Health Care Group built by my friends and I. {You see the poor, as you see them}, as for them they see them self not poor, but of a different race of people and environment and have faith it that which was in the past that so many do not have a clue of what God and Country is all about.
    Will be up dated today 3/25/2010
    Issue 1.
    FASC tax and pay in Forum, A Concept to help the Poor and Sick.
    FASC Concepts of a guideline of income and a fair payment for the poor to the rich.
    CLASS INCOME MONTHLY PAYMENTS
    {A} formatt for people making up to $29000.00 per year, EST of monthly cost up to $40.00 per month
    {B} up to $19000.00 per year, EST of monthly cost up to $30.00 per month
    {C} up to $12000.00 per year, EST of monthly cost up to $20.00 per month
    {D} from 0.00 income to $9000.00 per year / cost up to 0.00 to $10.00 per month
    MIDDLE CLASS TO THE POOR
    {A} {B} {C} {D} classification based on one person If married policy can be devided or stayed. These are concept numbers to open the mind…………..
    Submitted by Marh Hidabrand,asked would it not be better to build on , instead of droping off of the {A}{B}{C}
    {E} up to $49000.00 per year,EST of monthly cost up to $50.00 per month
    {F} up to $59000.00 per year,EST of monthly cost up to $60.00 per month
    {G} up to $69000.00 per year,EST of monthly cost up to $70.00 per month
    {H} up to $79000.00 per year,EST of monthly cost up to $80.00 per month
    {I} up to $89000.00 per year,EST of monthly cost up to $90.00 per month
    To balance a payment plan to fit within the bills, within a home……….{J} {K} {L} {M} exc………………….
    Need to balance to stay around $200.00 for above income and below $300.00 for the rich ?
    The same incentives apply if husband and wife wish to pay separate.
    The same incentives apply for the poor, even if all they can pay is $3.95 per month. No one is cut out of the rebuilding of the inter structure of Health care and the USA.
    The money is a investment into our further and is to be tax free, just the money paid in.
    You may ask: what about Medicare ? {is it not possible to merge Medicare into this concept ?}
    With in this movement the {A} {B} {C} {D} will remove health care from a company so that a company can see into the building of other projects and put people back to work.
    With the formatted goal of the use of this new concept, to form a more perfect Union within the design of the Health Care program offered, we submitted the up to 2 Trillion dollars per year. This will build a safety net / a buffer to maintain balance.
    The billion dollars per year is at a high EST. based at $10.00 x 250 million people. As you can see the numbers above suggest a very high in pack of funds, we can not project a high in pack because dollars are not a constant.
    at 100 000 000 million people x 10= $1 000 000 000 billion low ball figures
    1 billion x 4 weeks = $4 billion dollars
    4 billion x 12 months = $48 billion dollars
    so at 100 000 00 the numbers would have to increase to $40.00/per month x $40.00
    $40.00 x 48 000 000 000 = $1 220 000 000 000 per year at 100 000 000 people
    In the US the progression is:
    Hundred – 100
    Thousand – 1,000
    Million – 1,000,000
    Billion – 1,000,000,000
    Trillion – 1,000,000,000,000
    Quadrillion – 1,000,000,000,000,000
    and the interfacing of the FASC Card http://www.federalactsecuritycard.mysite.com
    We need to see into the inter structure of the Presidents concept,without this right we can not help,no matter how much we wish to. It would seem that if you do not play follow the leader on just one concept ,that the door is not really open.
    We offer the following concepts and we believe that it will be one that all can respect.
    FASC Concepts of a guideline of income and a fair payment for the poor to the rich.
    This is a concept to build on…….a idea, a way to bring life to hope where there is none.
    CLASS INCOME MONTHLY PAYMENTS
    {A} format for people making up to $29000.00 per year, EST of monthly cost up to $40.00 per month
    {B} up to $19000.00 per year, EST of monthly cost up to $30.00 per month
    {C} up to $12000.00 per year, EST of monthly cost up to $20.00 per month
    {D} from 0.00 income to $9000.00 per year / cost up to 0.00 to $10.00 per month
    MIDDLE CLASS TO THE POOR
    {A} {B} {C} {D} classification based on one person If married policy can be divided or stayed. These are concept numbers to open the mind…………..
    Submitted by Marh Hidabrand,asked would it not be better to build on , instead of dropping off of the {A}{B}{C}
    {E} up to $49000.00 per year,EST of monthly cost up to $50.00 per month
    {F} up to $59000.00 per year,EST of monthly cost up to $60.00 per month
    {G} up to $69000.00 per year,EST of monthly cost up to $70.00 per month
    {H} up to $79000.00 per year,EST of monthly cost up to $80.00 per month
    {I} up to $89000.00 per year,EST of monthly cost up to $90.00 per month
    To balance a payment plan to fit within the bills, within a home……….{J} {K} {L} {M} exc………………….
    Need to balance to stay around $200.00 for above income and below $300.00 for the rich ?
    The same incentives apply if husband and wife wish to pay separate.
    The same incentives apply for the poor, even if all they can pay is $3.95 per month. No one is cut out of the rebuilding of the inter structure of Health care and the USA.
    The money is a investment into our further and is to be tax free, just the money paid in.
    You may ask: what about Medicare ? {is it not possible to merge Medicare into this concept ?}
    With in this movement the {A} {B} {C} {D} will remove health care from a company so that a company can see into the building of other projects and put people back to work.
    With the formatted goal of the use of this new concept, to form a more perfect Union within the design of the Health Care program offered, we submitted the up to 2 Trillion dollars per year. This will build a safety net / a buffer to maintain balance.
    The billion dollars per year is at a high EST. based at $10.00 x 250 million people. As you can see the numbers above suggest a very high in pack of funds, we can not project a high in pack because dollars are not a constant.
    at 100 000 000 million people x 10= $1 000 000 000 billion low ball figures
    1 billion x 4 weeks = $4 billion dollars
    4 billion x 12 months = $48 billion dollars
    so at 100 000 00 the numbers would have to increase to $40.00/per month x $40.00
    $40.00 x 48 000 000 000 = $1 220 000 000 000 per year at 100 000 000 people
    In the US the progression is:
    Hundred – 100
    Thousand – 1,000
    Million – 1,000,000
    Billion – 1,000,000,000
    Trillion – 1,000,000,000,000
    Quadrillion – 1,000,000,000,000,000
    and the interfacing of the FASC Card http://www.fascmovement.mysite.com
    We need to see into the inter structure of the Presidents concept,without this right we can not help,no matter how much we wish to. It would seem that if you do not play follow the leader on just one concept ,that the door is not really open.
    We offer the following concepts and we believe that it will be one that all can respect.
    A FASC Concept, Children should be covered by moms or dads coverage at no extra cost. I once heard that their was a saying that is within the Christian world, it is in the best of man that through a concept of God, that He smiles on those who help the poor. Now this is your faith, as shared with people.
    FASC Concepts covers the web and is now noted to be the largest site in the U.S.A.
     

  2. My My My, To build a United Health Care Forum you must unite all the people as one. I once wrote to President Obama and stated to take the words of 250 million people of what Health Care should do for them, and place this before all on tv, remove this force pay concept, the pick and choose the best and dump the rest, all issues that are not of a moral building block of Bill To Law.
    But to do this you must step out side of the Artificial Intelligence within Government of what the dollar is next to the needs of a people. It must be known that the tax against the health care system is because it is a $100 trillion dollar package.
    Henry Massingale
    FASC Concepts in and for Pay it forward
    on google http://www.fascmovement.mysite.com

  3. As it would seem this Health Care issue now is based on DNA Testing. That maybe at birth to see if you can be covered by Health Care.
    The moral building block of what Health Care stood for is lost and now it is a way to make money off of the sick the dieing and the old. But now it seems that this is not enough. DNA testing so that Insurance Companies can pick and choose those who are of a certain cost figure.
    This story I found on The New York Times / blog
    and it is very simple, that if you are of a family that will cost the system to much money, your life is not worth the coverage….now one of the stories I found by typing in these words { d.n.a. testing to be able to get health care}
    The New York Times
    1.Insurance Fears Lead Many to Shun DNA Tests – New York Times
    Feb 24, 2008 … She worried that she might not be able to get health insurance, … And even doctors who recommend DNA testing to their patients warn them …
    http://www.nytimes.com/2008/02/24/health/24dna.html – Similar
    Insurance Fears Lead Many to Shun DNA Tests
    Victoria Grove wanted to find out if she was destined to develop the form of emphysema that ran in her family, but she did not want to ask her doctor for the DNA test that would tell her.
    She worried that she might not be able to get health insurance, or even a job, if a genetic predisposition showed up in her medical records, especially since treatment for the condition, alpha-1 antitrypsin deficiency, could cost over $100,000 a year. Instead, Ms. Grove sought out a service that sent a test kit to her home and returned the results directly to her.
    Nor did she tell her doctor when the test revealed that she was virtually certain to get it. Knowing that she could sustain permanent lung damage without immediate treatment for her bouts of pneumonia, she made sure to visit her clinic at the first sign of infection.
    But then came the day when the nurse who listened to her lungs decided she just had a cold. Ms. Grove begged for a chest X-ray. The nurse did not think it was necessary.
    “It was just an ongoing battle with myself,” recalled Ms. Grove, of Woodbury, Minn. “Should I tell them now or wait till I’m sicker?”
    The first, much-anticipated benefits of personalized medicine are being lost or diluted for many Americans who are too afraid that genetic information may be used against them to take advantage of its growing availability.
    In some cases, doctors say, patients who could make more informed health care decisions if they learned whether they had inherited an elevated risk of diseases like breast and colon cancer refuse to do so because of the potentially dire economic consequences.
    Others enter a kind of genetic underground, spending hundreds or thousands of dollars of their own money for DNA tests that an insurer would otherwise cover, so as to avoid scrutiny. Those who do find out they are likely or certain to develop a particular genetic condition often beg doctors not to mention it in their records.
    Some, like Ms. Grove, try to manage their own care without confiding in medical professionals. And even doctors who recommend DNA testing to their patients warn them that they could face genetic discrimination from employers or insurers.
    Such discrimination appears to be rare; even proponents of federal legislation that would outlaw it can cite few examples of it. But thousands of people accustomed to a health insurance system in which known risks carry financial penalties are drawing their own conclusions about how a genetic predisposition to disease is likely to be regarded.
    As a result, the ability to more effectively prevent and treat genetic disease is faltering even as the means to identify risks people are born with are improving.
    “It’s pretty clear that the public is afraid of taking advantage of genetic testing,” said Dr. Francis S. Collins, director of the National Human Genome Research Institute at the National Institutes of Health. “If that continues, the future of medicine that we would all like to see happen stands the chance of being dead on arrival.”
    Caught in a Bind
    For Ms. Grove, 59, keeping her genetic condition secret finally became impossible. When her symptoms worsened she was told to come back to the clinic before antibiotics would be prescribed. But there had been a snowstorm that day, and she could not summon the strength to drive.
    “I have alpha-1,” she remembers sobbing into the phone. “I need this antibiotic!”
    The clinic called in the prescription.
    Ms. Grove, who does freelance accounting from home and has health insurance through her husband’s employer, allowed herself to be identified here because she said she felt an obligation to others — including some in her own family — to draw attention to the bind she sees herself in.
    “Something needs to be done so that you cannot be discriminated against when you know about these things,” she said. “Otherwise you are sicker, your life is shorter and you’re not doing what you need to protect yourself.”
    Employers say discrimination is already prohibited in the workplace by the Americans with Disabilities Act and existing laws governing privacy of medical records. But employee rights advocates say nothing in those laws explicitly prevents employers hard-pressed to pay for mounting health care costs from trying to screen out employees they know are more likely to get sick.
    Courts have yet to rule on the subject. When the Equal Employment Opportunities Commission sued the Burlington Northern Santa Fe Railway for secretly testing the blood of employees who had filed compensation claims for carpal-tunnel syndrome in an effort to discover a genetic cause for the symptoms, the case was settled out of court in 2002.
    And in 2005 when Eddy Curry, then the center for the Chicago Bulls, refused a genetic test to learn if he was predisposed to a heart ailment, the team traded him to the New York Knicks.
    Insurers say they do not ask prospective customers about genetic test results, or require testing. “It’s an anecdotal fear,” said Mohit M. Ghose, a spokesman for America’s Health Insurance Plans, whose members provide benefits for 200 million Americans. “Our industry is not interested in any way, shape or form in discriminating based on a genetic marker.”
    FASC Concepts in and for Pay It Forward
    http://www.fascmovement.mysite.com on google

  4. By Nate:
    “Here is why 50 exchanges would be better and 1000 would be even better still.
    Competition,”
    “the fat never was in insurance”
    Which is it? Having trouble keeping on point Nate (except for the usual “liberal” demonizing)?
    “Peter you can’t compare two countries efficency by comparing GDP %. That stat means nothing.”
    Well the citizens of those single-pay countries certainly don’t think it means nothing.
    Since insurance rates are largely a result of actuarial statistics, and every insurance company’s actuaries look at the same numbers, rates won’t get too wide apart. Add that to the requirement for insurance corporations to appease Wall Street investors and the word “competition” means nothing, except to Republicans (and now Democrats) trying to kill any real reform.
    Competition will only be takeaways, not improvements to “efficiency” or rates, and certainly not reining in providers system over utilization.

  5. Peter you can’t compare two countries efficency by comparing GDP %. That stat means nothing.
    the fat never was in insurance, only liberals where ever dumb enough to belive that. The fat is in what is purchased with insurance.
    Your making silly generalizations without any regard for reality. Insurance admin is a minute percent of total spending no one outside the left thinks that is where the problem is.

  6. Nate, if you’re measuring “efficiency” by cost then clearly single-pay (or heavily gov. controlled) countries are doing it for about half of U.S. GDP percentage. Too much competition destroys profits and destroys markets, that’s why when there is too much competion industies amalgamate and there settles out a profitable mix of suppliers to consumers. By the way BCBS has never operated anything close to a benevolent non-profit. And, if as you (and others) say, there’s only about 5% profit in insurance then where’s all this fat going to be trimmed by competition? The only competition will be leaner less inclusive policies that may cost less, but will also provide less coverage.

  7. I would love to see all of our issues with health care fixed. However, that is not the world we live in. And certainly the convoluted government system does not lend itself to adequate fixes.
    So, in lieu of that I would simply like to see progress. Steps in the right direction to allow Americans access to adequate health care. I’ve been in health care for a long time. From being a nurse at the bedside to a small hospital Administrator.
    This I can tell you. The system is broken and needs major work.

  8. I agree with the general premise of the post. However, I would point out that section 1334 of the newest Senate plan appears to be trying to come to a happy medium between an entirely national exchange and an overly-variegated state-based patchwork. This happy medium would be accomplished by allowing for insurers to offer multistate plans, but at the same time requiring those multistate plans to meet certain feder\al requirements that would ensure that there is a floor set to the level of benefits and other characteristics of the multistate plans. This would enable purchasers to have a consistent idea about the basics of any plan offered on the exchange, while retaining room for varied multistate plans depending on the region. Moreover, these plans would be overseen by the OPM–the same agency that oversees the FEHB.
    Whether this is the best approach to take is an open question. Nevertheless, I thought I would point out the nuanced approach that the most recent Senate bill is seeking to implement.

  9. I wonder if proponents of a national exchange (or of single payor, for that matter) realize that Medicare is actually administered by a number of (private) carriers — even our prototypical “national” program is at best regional. And whatever did happen to state regulation of insurance? Granted, some states have not done a great job with that, but the feds don’t have a lot of regulatory success to point to either (seems to me I recall a certain banking crisis recently…)

  10. Michael that would be all and good if you got even a single fact correct. When your argument is 100% false what are the chances your conclusions would be right?
    Over 50% of private insureds are covered by non profit insurers
    Something like 60-70% of hospitals are non profit
    Medicare and Medicaid are non profit
    for a system supposedly flawed by its profit motive the vast majority of it is in fact non profit.
    Becuase 100% of healthcare is not elastic we should ignore the 60% that is and over pay for it and consume it in a wasteful manner? That makes perfect sense. When you do have a cold lets treat it the same way we would when you have cancer?
    “Anyways, no one has ever given any evidence that a single-payer system is less efficient than what we have now:”
    Oops wrong again, the correct statement is in your limited research and understanding you have never read such a study, there are tons of them out there and you can gleen the same fact from the annual CBO analysis of Medicare and Medicaid or the annual CMS reports. When you don’t know 99% of the facts declaring something doesn’t exist is usually going to bite you in the ass.

  11. Michael,
    I agree.
    The most glaring problem with our system. The number of people employed in this system that never touch a sick person.
    A patient is a patient, location or “plan” should not matter.

  12. Competition is all well and good for goods with elastic demand and supply. Health care isn’t one of them: when you’re sick, or when your young child is sick (and I’m not talking the sniffles here, I’m talking pneumonia, cancer, etc.) you do whatever it takes, and don’t ask the provider for a quote and call around. Nice to do in theory, but totally unrealistic.
    the reason Medicare is so broke is because of our obsession with competition and with the for-profit/fee-for-service model of health care.
    Anyways, no one has ever given any evidence that a single-payer system is less efficient than what we have now: actually, it’s hard to imagine a less efficient system than what we have now. We pay more for less care than any other country in the world, and many of those ahead of us have single-payer systems.
    And I know the response to this: “but America’s different!” As I am constantly reminding the hospitals I consult: “every hospital is special, but you are not that different.” Same principle applies.

  13. > In other words, they would be non-standardized, and
    > this would create a serious barrier for participation
    > by large, multi-state employers.
    So what? Should we erase entirely the role of the states to enable “bigness”? MD as Hell raises a good point, but it is as old as Jefferson and Hamilton. It seems we’re coming down firmly on Hamilton’s side whilst singing Jefferson’s praises…
    t

  14. Since Bill and Michael want to bury their head and ignore history let me remind everyone how well single national programs work out for example Medicare. Lets see for starters it’s 34 trillion in the hole. Next up they couldn’t adapt and add drug coverage until 2006. Since it is no ones money they happily live on with 10%+ being lost to fraud and waste.
    Your both right, a non-accountable, slow to adapt, bank breaker is EXACTLY what we need. That would make things so much better!
    Here is why 50 exchanges would be better and 1000 would be even better still.
    Competition, if you don’t have the threat of failure you have no incentive for efficient operation or improvement. Medicare doesn’t have to evolve becuase it has no competition.
    Experiment, 50+ different excahnges can try different things and those that work copied by other exchanges. This is why ERISA plans are the most efficient and cutting edge, their are thousands of them tying different things, a ton don’t work but when they do they can be quickly adapted by the rest.
    To Big to fail, one exchange means no matter how bad it was it would never be allowed to fail and we all know how that turns out
    Michael how does a 834 for BCBS differ from one for Aetna or UHC? This is 2010 your making 2000 arguments.
    It cost more to comply with Medicare then it does with Private insurance. One set of badly written intrusive laws is worse then 500 different “request” private insurance can’t force a provider to do anything where as Medicare has thousands of laws.

  15. @MD as HELL: Not at all: in an ideal world (at least from a free-market democracy perspective), we could rebuild this country up in a way where we don’t have institutionalized segmentation (i.e., states, counties, and towns as separate entities), but that would be impossible to administer.
    And that’s why setting up 50+ exchanges would be worse than setting up a national one. If you only have one program to administer, you only have to administer one program. Similarly (but I’d argue more importantly), providers only have to cater to one set of administrative rules and regs: hospitals these days have entire fleets of staff to figure out which forms to fill, let alone fill them, on each patient. How much more time and money could be spent on keeping patients healthy if you didn’t need a different billing clerk for BCBS, Aetna, UHC, etc.?
    Ultimately this is a smaller scale of the single-payer argument, and probably just as doomed to failure at the hands of moneyed interests.

  16. So you are stepping onto the slippery slope where states are ultimately eliminated. Period.

  17. Unfortunately, this health care reform bill is going to get passed and cause even more confusion. Create more competition within the health care insurance community and prices would go down.

  18. I think a national system would be easier for the American people to understand. The last thing we need in this debate is more confusion. Why can’t there be a single uniform health system that applies to all American citizens?

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