Health Insurance Exchanges in the Picture for Reform?

Many have tried and failed in this area, due to members going outside and negotiating their own agreements if they had a group that didn’t have as many high risk individuals. That does somewhat defeat the purpose but in part this is what Massachusetts has done. To cover everyone it’s down to biting the bullet and giving everyone coverage, low and high risk, as those who are high risk pay premiums too, their expenses are more than others, but again that’s what insurance is all about, spreading the cost over a large population so nobody is hit hard individually with cost. As long as cherry picking continues and groups are defined based on expenses, its’ hard to make a winner here and California had just that situation occur. BD

As Congress debates creating insurance "exchanges" as part of a health-care overhaul, the failure of a similar effort in California may offer important insights, former participants in the program say.

From 1993 to 2006, small businesses in California could buy health insurance through an exchange run initially by the government, and later by a nonprofit group.

The plan was undermined when some businesses with relatively healthy workers bought policies more cheaply directly from insurers, bypassing the exchange. That left the exchange with a shrinking pool of less-healthy workers, forcing rates higher and prompting many insurers to withdraw. Managers chose to shut the program in 2006 when one of three remaining insurers withdrew.

Among those lessons, he and others said: Employers and individuals who qualify must be required to obtain health insurance through the exchange. Failing that, John Grgurina, who ran California's exchange from 2002 until it ended, said government must impose rules governing rates and eligibility to protect the exchange from attracting a disproportionate share of high-risk people.

Massachusetts and Connecticut have had more success. Massachusetts created an exchange as part of its universal-health-care effort; the exchange has helped expand coverage, although some business owners have balked at the costs, and state officials have worried about the impact on the state budget.