Implementing Health Insurance Exchanges: The Challenges Ahead

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Health insurance exchanges are the centerpiece of the private health insurance reforms in the Affordable Care Act. If they function as planned, these exchanges will expand health insurance coverage and improve quality, plus reduce costs.

In the new Commonwealth Fund report Health Insurance Exchanges and the Affordable Care Act: Key Policy Issues, Timothy Jost of the Washington and Lee University School of Law examines 13 critical issues that federal and state authorities must resolve if the new exchanges are to succeed. Among them are:

  • Ensuring that exchanges don’t become victims of "adverse selection" — enrolling disproportionate numbers of the least healthy individuals.
  • Enrolling enough individuals in exchanges to achieve sufficient market power, economies of scale, and risk pool stability. 
  • Offering consumers choice without complexity. 
  • Maximizing transparency and disclosure — one of the most important tasks in the implementation process. 
  • Encouraging competition among insurers on value and price. 
  • Keeping down administrative costs of exchanges, as well as those of insurers and employers. 
  • Establishing strong relationships between exchanges and employers.

"For exchanges to succeed, they will have to avoid the pitfalls of earlier efforts that failed," writes Jost. "The Affordable Care Act goes to some length toward achieving this goal, but more will have to be done as implementation proceeds." In an upcoming Fund report, he will detail policy options for addressing the problems that have stymied past exchange efforts.

For more on exchanges, read the author's post on the Fund Blog.