Report: California experiences should guide national health exchange discussion

Health exchanges--common marketplaces allowing buyers to choose between competing health plans--are a key feature of most health reform proposals. So why not look at the experience of California, which has already road-tested the idea over the last 15 years? This is the suggestion of the nonprofit California HealthCare Foundation.

The Foundation notes that while California has worked to make such an exchange work for about 15 years, the effort ultimately didn't pan out, largely because it seems health plans largely refused to get into line. Specific reasons it fell apart include the following:

* First, don't assume that health plans will participate--that's not necessarily the case. And if they don't, it's difficult for the exchange to offer real choice or improve portability for beneficiaries, researchers note.

* Another issue is that the exchange probably won't be able to offer lower prices without broad health plan participation, because economies of scale will be hard to achieve. Also, even health plans may not give the exchange a lower price than it offers in other contexts.

* Yet another pressure on the exchange is that if large employers want to use it to buy coverage for large numbers of employees, they may find they'll do better outside the exchange. Again, without health plans throwing their might behind it, good luck making the exchange the economical option.

The big question mark here, which the study couldn't address, is what effect a public option would have if thrown into the mix. A cheaper public plan could conceivably put pressure on health plans to get into the water and be competitive. (Sounds like a good argument to include one in the mix--but maybe I'm wrong. What do you think?)

To get more data from the report:
- read this Healthcare Finance News piece

Related Article:
Including public option plans could save U.S. $265 billion, report says