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Some States Try to Spur Competition in Exchanges to Keep Rates Down

Originally published by United Benefit Advisors

The Patient Protection and Affordable Care Act (PPACA) is national legislation, but rates could be substantially different from state to state under the exchange system.

Exchanges are marketplaces that will serve people who don’t have other means to get health coverage, with each state having its own exchange.

States were given the option of managing their own exchanges, or having the federal government take on management duties. More than 30 states chose the latter. According toThe Washington Post, the six states (California, Massachusetts, New York, Oregon, Rhode Island, Vermont) that have selected an “active purchaser” model can limit price escalation more than those using a “clearinghouse” model, which includes those run by the feds. An “active purchaser” selects insurers to participate in their exchanges, while in a “clearinghouse,” any insurer who meets a set of criteria is eligible to participate.

On May 23, California announced that there won’t be major rate hikes for health plans available through its exchange. The declaration buoyed many PPACA supporters, who cited it as evidence that the law can be cost-effective. However, some conservative critics and other analysts panned the announcement as misleading, noting that the state compared the rates people will pay for individual health plans with the rates that small businesses pay now. But California officials say that current individual rates aren’t a good comparison because some are skimpier than what they will be under PPACA, and that the level of benefits will be closer to what many small businesses get currently, Politico reported.

California, however, is also atypical for another reason. Even after selecting less than half of the insurers that applied to participate, it still has 13 health insurers on its exchange, while some states have barely any competition at all, Politico reported. Despite this, the White House is estimating that 90 percent of people signing up for exchanges will have at least five choices.

California also is spending substantially more than most states on outreach to targeted demographics to assure health insurers they’ll get a mix of people, not just those with health problems, another factor in keeping costs down. Further, another decision limiting price increases is the state is keeping the most expensive providers — such as the most-expensive hospital — out of its plans, Politico reported.

Oregon, meanwhile, has decided to publish proposed rates, which could force health plan operators to be more competitive,AIS Health reported. After it published proposed prices ranging from $169 to $422 for one level of plan, it caused some plans to consider revising their proposals.

Overall, however, it’s still a waiting game to see how prices will change in most states. Few states have published proposed premium increases, noted NJ Spotlight, which reported that Maryland expects its rates to jump 25-138 percent, while Rhode Island comes in at a modest 3-8 percent.

Clearly, however, for people buying insurance through the exchange system, where they live could have a substantial impact on how PPACA will affect their pocketbook.