Insurers form health benefit exchanges to compete with government-operated exchanges
I recently came across this interesting article published at the website of the American Medical Association discussing how large insurers are forming their own insurance exchanges to compete with state run exchanges. State/regional health benefit exchanges are a critical component of the Patient Protection and Affordable Care Act (PPACA). They are intended to aggregate purchasing power for individuals and small employers by providing them a single marketplace to purchase coverage from a variety of insurers and managed care plans. The policy goal as stated in the PPACA is to increase consumer choice and competition among payers.
But perhaps an unforeseen consequence is that competition would entail payers competing not just against each other in government-operated exchanges but also directly against the exchanges themselves. According to the amednews.com article, motivating payers is the desire to retain a degree of control and independence from state-run exchanges:
Large insurers have invested in private exchange start-ups with the idea that they can offer a better insurance marketplace for employers and workers than a public exchange, keeping private plans dominant in the commercial market.
Moreover, the article continues, payers believe they can do a better job at attracting individuals and small businesses with their own exchanges. Rob Panepinto, managing director for the Client Practice and Exchange Solutions at Connextions, tells amednews.com that “government is not a good marketer.” In California, however, the California Health Benefit Exchange is gearing up in the apparent hope to prove that assessment wrong. The Sacramento Bee this week reported the Golden State’s HBEX tapped Ogilvy Public Relations to begin creating a marketing and public outreach and education strategy.
Looking back to the Clinton administration’s unsuccessful reform proposal of 1993-94, the emerging market dynamic of competing public and private exchanges wouldn’t likely have occurred. The Clinton reform plan would have created government run regional purchasing alliances that would have controlled the entire universe of payer and provider markets with both payers and providers competing within the alliances under the reform plan’s “managed competition” principle.