Employers Should Plan for Coming Insurance Exchange

Washington states effort to establish an insurance Exchange by January 1, 2014, as part of the 2010 federal health care reform law, is getting less publicity than the pending U.S. Supreme Court case challenging the constitutionality of health reform. But the Exchange will lead to a transformation of the current system that relies on employer-sponsored coverage, and therefore deserves special attention from employers.

The Exchange is intended to provide consumers with centralized, online access to health care coverage products and, for individual consumers, access to federal subsidies to assist families with household incomes up to 400 percent of the federal poverty level (about $90,000 for a family of four) in buying coverage.

A number of experts, including consulting firms McKinsey and Towers Watson, believe the federal law may encourage some employersespecially smaller firms and those with large proportions of lower-income workersto discontinue employer-sponsored coverage and encourage their employees to seek the federally subsidized coverage in the Exchange. Premera has already heard from some employer customers that are assessing that option.

Government policies that dramatically change access to health care coverage are fraught with the risk of unintended consequences. In the 1990s, for example, flawed state-level health care reform forced the temporary closure of the market for new sales of individual and family coverage. If exchanges are not carefully constructed, the individual market could again be put at risk. The state needs to be prudent in implementing this new system by addressing:

Mandated benefits. Federal law mandates more expensive benefits than most individual customers purchase today. The state should carefully consider the impact on affordability when selecting a benchmark plan for the Exchange. Higher benefits will mean higher costs.

Administrative complexity. The Exchange should be focused on successfully carrying out the extensive requirements expected under the federal law before attempting to expand its operations and functions further.

Stability in the individual market. The state should retain its high-risk poolfor individuals with significant medical needsin 2014 and beyond for current enrollees in the program. Carefully handling this issue would avoid an acceleration of medical costs in the market for individual coverage that would force a significant increase in premiums.

The potential impacts for employers are significant. Employers who choose to send employees to the Exchange for coverage should be assured they are not sending employees into a flawed system. If the Exchange upsets the current stability in the individual market that has been achieved in the wake of the 1990seven unintentionallysoaring costs for coverage would be harmful to all who seek to purchase coverage through the Exchange.

In short, the Exchange should organize the market for coverage, not control it. Some prudent guiding principles for this work include:

Consumer access. The Exchange should promote a broad choice of health plans for consumers.

Competition. The state should create an even playing field rather than barriers to health plans participating in the Exchange equitably. The minimum requirements established by the federal law already provide a substantial framework leading up to 2014.

Regulatory efficiency. The Exchange should rely on the insurance commissioner to oversee premium rates, rather than add duplicative oversight.

While these concepts may sound simple, successfully implementing such a complicated government program will not be easy. Every employer interested in health care coverage for its employees should find a way to be engaged by consulting with its health plan and encouraging the state to act prudently. By 2014, the die already will have been cast.

GUBBY BARLOW is president and CEO of Premera Blue Cross.