Since 2006, Massachusetts has seen a dramatic reduction in premiums for individuals and small businesses after creating an insurance exchange.
February 11, 2010 – It was quite a coincidence. Almost the same time Regence BlueCross BlueShield received approval to raise individual rates by 16 percent, one of its top executives urged policymakers to proceed slowly with setting up an insurance exchange so the market wouldn’t be disrupted.
“Go slow and build on what’s working,” Mike Becker, head of regulatory and legislative affairs for Regence told the Oregon Health Policy Board on Feb. 9. “Seemingly minor changes can significantly impact costs and risk in unexpected ways.” He was representing Oregon’s domestic insurers that provide coverage to two million Oregonians.
But Eileen Brady wasn’t convinced. “I just can’t buy your argument because I pay so much as an employer,” said the co-owner of New Seasons Market who sits on the Policy Board. “I believe an exchange could put some pressure on cost.”
An insurance exchange – coupled with major health reform requiring everyone to purchase insurance -- has had a huge impact in Massachusetts. Since its reform law was passed in 2006, individual rates have gone down by 25-40 percent, according to Nancy Turnbull, who sits on the board of the Massachusetts Health Insurance Connector, and is a senior lecturer in health policy and associate dean for educational programs at Harvard University’s School of Public Health.
The exchange gives consumers an opportunity to navigate the system and make more informed choices about competing health plans, but it definitely won’t lead to “nirvana,” Turnbull told the Policy Board. It does, however, help “shine a bright light on premium increases,” she said.
If Oregon decides to follow Massachusetts’ lead, it needs approval from the legislature. And it’s extremely likely there’ll be strong opposition, particularly from the insurance brokerage community, which derives its income by selling policies to consumers and businesses.
Steve Doty made that perfectly clear. Representing the Oregon Association of Health Underwriters, he cautioned policymakers against heading in that direction unless, he insisted, an exchange would actually reduce overall costs.
“It might be nice to have a savvy web site,” said Doty, who runs Northwest Employee Benefits. “But the real issue we’re having in this debate is how to reduce the cost of healthcare, and I can’t see how this approach can save any money.”
Nita Warner questioned its value as well. As president of a small business in Hillsboro,
Ornelas Enterprises, Inc., she’s concerned about having to pay an assessment to support companies that don’t offer health coverage and also worries that people will choose health plans on the exchange that have physicians with open practices.
“I don’t see any benefits to small business,” said Warner who also sits on the Policy Board. She also urged officials to hunt down medical supply companies that charge a $2,000 profit for devices that sell for a fraction of that price.
It’s unknown whether the Policy Board will recommend the implementation of an insurance exchange when lawmakers convene in 2011. They did, however, agree that by making changes to the delivery system, it will have an impact on population health and cost.
Meanwhile, here are some of the highlights of the Massachusetts Health Reform Law
- Insurance is subsidized for low and moderate income (for adults up to 300 percent of the Federal Poverty Level.
- The individual and small group market (1-50) has been merged and everyone can purchase insurance, including young adults, on the exchange known as the Connector (www.mahealthconnector.org).
- Dependents can remain on their parents health plan until age 26.
- Individuals over age 18 are required to have health insurance – “if it’s affordable” or pay a state income tax penalty.
- Employers must provide coverage or make a “fair share” contribution.
- The monthly individual premium ranges from zero for those earning less than $16,260 to a high of $342 a month for people whose income is between $44,201 and $54,600. Above that level, there is no subsidy.
Since the reform went into effect, none of the carriers have left the market, Turnbull said, and now only 2.7 percent of the population is uninsured, compared to 10.4 percent in 2006, before the reform was implemented.
Public support for the individual mandate and health reform initiatives remains high, which Turnbull called “unprecedented.” In 2006, after the reform passed, 61 percent favored the reform. Three years later, in 2009, polling showed that 59 percent remained supportive.
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