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.
Recent Comments