Guest Commentary: Why opting into the new health insurance exchanges is a smart move

It's possible that a large number of Americans starting in 2014 will buy their health coverage through the new health insurance exchanges established by the Patient Protection and Affordable Care Act.

And that's a good thing. Despite the current anti-health reform rhetoric, the exchanges offer too many potential advantages for consumers and insurers for them not to move forward. Hence, most states are likely to set up their own exchanges rather than let the federal government do it for them. The exchanges and new insurance rules, the experts say, could foster greater competition and force insurers to operate more efficiently and transparently.

Economists with the Centers for Medicare & Medicaid Services projected last week that 31 million people will get coverage through the exchanges by 2019--significantly more than the 24 million previously estimated by the Congressional Budget Office. The number of people buying through the exchanges probably will jump sharply in 2017 when states can allow employers with more than 100 workers--in addition to smaller employers and individuals without employer coverage--to buy through the exchanges.

Most major health insurers will participate in the exchanges, and, as a consequence, the insurers will have to change the way they operate, predicted Maureen Fahey, the national healthcare reform leader for KPMG. "Larger insurers are going to need to be part of the exchanges from a sheer volume perspective," she said. "They'll have to balance a lower margin, higher volume book of business that's consumer driven. It's a new paradigm."

But much depends on how the federal government and the states write the exchange rules, the effectiveness and legal fate of the provisions requiring all Americans to obtain coverage, and whether states currently  resisting the health reform law ultimately agree to establish exchanges. "You have a checkerboard of some states like California moving forward and some states not doing so," Fahey said. "Every state needs to have some form of exchange, or else the reform infrastructure will not be in place."

The exchanges will force big changes on health plans. Except for grandfathered plans, products sold both inside and outside the exchanges must conform to four standard benefit designs with different cost-sharing levels. Requiring insurers to sell the same standard packages both inside and outside the exchanges lessens the incentive for insurers to sell solely outside the exchanges, said Sara Collins, vice president for affordable health insurance at the Commonwealth Fund in New York. They can't sell leaner packages to attract younger, healthier customers.

Launching the new exchanges by 2014 is quite doable if states follow the successful exchange models of the FEHBP, Massachusetts Health Connector, Medicare Advantage, and Medicare Part D, said Walton Francis, principal author of Checkbook's Guide to Health Plans for Federal Employees. He worries, though, whether insurers will see the exchange risk pools as broad and viable--particularly if the courts strike down the reform law's mandate mechanism as unconstitutional.

Robert Zirkelbach, a spokesman for America's Health Insurance Plans, said the final rules will determine how viable the new system is for insurers and how affordable it is for consumers. Still, he anticipates that "as we move toward the new marketplace there will be greater emphasis on the value and quality that plans provide."

To thrive under the new exchanges and market rules, Fahey predicts insurers will have to become more creative and administratively efficient, and tighten their bonds with providers. "Some insurers may take the attitude of staying out of the exchanges because it's a money loser," she said. "But in 2017 when larger employers can also jump into the exchanges, I really don't believe opting out of the exchanges would be a viable option."

Last week, Health and Human Services Secretary Kathleen Sebelius warned insurers that those unjustifiably hiking premiums may be locked out of the exchanges. That's not only legally dubious, it's absolutely the wrong approach. Let's set up the exchanges to give consumers clear comparative information on each plan's benefits, costs and quality. Then let consumers, not the government, choose the winners.

Editor's note: Harris Meyer is a journalist based in Yakima, Wash. who has won many awards for his reporting, including the National Institute for Health Care Management Award and the Association for Health Care Journalists Award.

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