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Exchanges: Plenty of Options, or Not?

Originally posted by United Benefit Advisors

Health care exchanges, one pillar of the Patient Protection and Affordable Care Act (PPACA), launch in just two months, yet there is still great uncertainty about how effective they will be among legislators, insurance brokers and advisors.

The basic idea of the exchanges, put simply, is to create competition and thus, more choices. Yet when the exchanges launch in October, people in many states aren’t expected to have a lot of those choices, Stateline, the daily news service of the Pew Charitable Trusts, reported.

Health economists believe the exchanges will drive more competition to states that already have robust competition among insurance companies – Colorado, Minnesota and Oregon to name three – but won’t add much to states that are dominated by a single insurance company.

The exchanges are designed as private markets operating within federal guidelines, with the purpose of giving Americans who don’t get health insurance from employers the opportunity to choose from an array of private insurance plans, and to generate competition among insurers that will lead to lower premiums.

Some predict that new insurance carriers, made up of hospitals and large physician practices, will emerge. Medicaid managed-care companies, which are used to providing care to low-income people, may decide to offer commercial plans on the exchanges, Stateline went on to say.

According to the Wall Street Journal, many of the plans offered will include relatively few choices of doctors and hospitals. In some cases, plans will layer on the other limits, such as requirements that patients get referrals to see specialists, or obtain insurer authorization before costly procedures. A recent McKinsey & Co. analysis of 955 consumer exchange plan filings found that 47 percent were health maintenance organizations or similarly-designed plans; such plans generally don’t pay for care provided outside their networks.

On the positive side, a study this week by The Hill states that overall, adopting the new health care reform mandates — including participating in the exchanges — will not require major plan changes or cost increases.

It remains to be seen if the kind of competition the exchanges were developed to provide materializes, and if individuals will accept limited options in providers.