Health Insurance Exchanges Work

The Salt Lake Tribune Editorial Board recently used strong words to criticize the Utah Health Exchange. Its perspective ran afoul of our firm’s recent experience with the Utah exchange, which has been overwhelmingly positive.

Like many small businesses, the triggering event for our involvement in the Utah Health Exchange was the appearance of our insurance broker who laid out a spreadsheet presenting a 22 percent increase in next year’s premium costs. Disappointed, we asked our broker to review other options.

The conventional market yielded quotes ranging from a 22 percent to a 134 percent increase. Ask any small business and you will learn that these increases come right out of employee compensation and, in many cases, new hires. Containing these costs, particularly in small businesses with small risk pools, has eluded the best minds in health care policy for decades.

We asked our broker to explore the Utah Health Exchange with vigor. We considered it last year, but the deadlines proved to be an obstacle for us. Our experience this year was remarkable and is instructive for states that object to state-created health insurance exchanges on the flimsy basis of their association with federal health reform.

The Utah Health Exchange started in August 2009 with the primary target of helping small businesses obtain health insurance for their employees. It was named an exchange before the fury over Obamacare tainted the concept.

The word “exchange” connotes the market freedom that is associated with activities like the New York Stock Exchange. The Utah Health Exchange is organized by state government, but driven by the market. What we found was a transparent system that created options for every individual employed by us and exemplified market principles, states’ rights and federalism.

Our premium increase ended up at 6.6 percent, which is 3 to 4 percentage points below the general health care market trend and significantly lower than our prior bids. Each employee had an opportunity to choose from 191 different health plans available on the exchange. The selection process included options from full coverage to high deductible health savings accounts.

Some in our firm chose deductibles as high as $10,000 and put the cost savings’ difference into their HSA. Others chose a default plan that approximated quite closely the plan we had from the previous year. Every person on our staff came out financially ahead, either with money in their pocket or money directed toward their HSA.

Perhaps unwritten and maybe unknown until you experience it is the value of transparency. A health insurance exchange sheds light on competition and allows you to see with greater precision where your money flows.

The exchange discloses the $37 per month per insured broker fee structure so you know precisely the cost for broker services. A convenient dashboard allows you to follow where every insurance dollar is spent.

The administrative savings were significant since our employees now control their contributions and their health plan. Leavitt Partners defines their contribution; employees pick the health plan that best suits their needs. And if our employees leave us and work for another company in the exchange, their policy travels with them.

I would postulate that if we ever left the exchange our employees would rebel given their newly discovered options and control of their own insurance future. I’m certain they will like their raises as well.

It may be fun for editorial writers to opine negatively about health insurance exchanges. It is even more enjoyable to experience health policy innovations that improve coverage, contain costs and expand options.

Rich McKeown is the president and CEO of Leavitt Partners, a health care consulting company that consults with six states about health insurance exchanges and receives approximately 13 percent of its revenue from its exchange practice. He is also the former chief of staff in the U.S. Department of Health and Human Services. This opinion editorial was originally published in the Salt Lake Tribune on September 16, 2012.


6 replies »

  1. Health insurance exchanges certainly create a more accessible and competitive market for buying health insurance. Ordinary individuals and small business owners will find it easier to purchase coverage that best fits their needs at a lower cost.

  2. This highlights the benefits to employer and employee of a transparent process that should be used by all health care insurance providers. This Exchange is a localized service and it may be impossible to provide the level of detail required for worldwide/international services where the market forces are more complicated.

  3. Exchanges provide healthcare consumers and small employers a tremendous opportunity to actually be an informed shopper for their healthcare choices. The success will be determined if we can keep the complexity of the options and transparency of the plan information at a level that consumers can actually use this venue to make informed choices.

  4. Defined contribution is the wave of the future for health insurance. Employers love it and so do employees.

  5. That broker fee sounds extravagant. $37 per month per insured………if there are 20 insureds, the broker makes $740 per month on the group. And for what? a new enrollment now and then? claims are handled directly by the insurer in almost all cases now.

    I am not against Exchanges………I favor anything that will pull small group and individual insurance out of the actuarial death spiral that leads to 134% annual increases.

  6. Great – somebody that knows how the ‘Exhanges’ function and ‘Work’. That pool of viable experts is small indeed. Please explain how in the issuing of policies with guaranteed universal issue, without mitigated underwriting requirements in line with lack of annual or lifetime maximums as stipulated by the PPACA, attests to the viability and persistency of such plans. And further why was the broker of record not able to represent these plans at time of renewal to your company? Thanks !