State exchanges were a Republican idea, and early evidence shows they’re working.
The House of Representatives is expected to vote for the 40th time this week to repeal Obamacare, not because anyone believes the 40th time will be the charm, but because the exercise will enable Republican freshmen to vote for repeal and brag about it during their campaigns next year.
Those lawmakers probably won’t tell their constituents that two of the most important provisions of the law they profess to hate were actually Republican ideas the Democrats embraced in hopes of getting bipartisan support for reform. The first such provision is the requirement that all Americans not covered by a public plan like Medicare or Medicaid must buy coverage from a private insurance company. The second provision: establishment of state health insurance marketplaces (called exchanges in the law) where private insurers compete online for customers.
One of the first states to set up such a marketplace was Utah, among the reddest of states, which had its exchange up and running months before Obamacare was enacted. Starting this fall, Americans everywhere will be able to shop in Utah-like marketplaces for coverage effective January 1, the date the GOP-inspired requirement to have health insurance kicks in.
The reason Republicans once liked health insurance exchanges is that in theory they will facilitate choice and competition, which should bring down the cost of coverage. If the exchanges work as planned—and as Obamacare stipulates—consumers will be able to make apples to apples comparisons among health plans and pick the one that seems to offer the best value.
Based on news out of Oregon last week, there is reason to believe that the theory is holding up and that consumers will indeed benefit from price transparency that until now had never been available to the layman.
Health insurers in Oregon were required to tell the state last week how much they planned to charge for the policies they would sell this coming fall on “Cover Oregon,” the name of the state’s exchange.
As reported in the Oregonian, when the state insurance department published the insurers’ proposed rates in a chart, some of companies that had planned to charge the highest rates wasted no time in saying said they had made a serious mistake and would quickly revise their offerings with lower rates.
The charts were made available online Thursday. Within 24 hours at least two insurers asked for a do-over, according to the newspaper. One of the companies promising to resubmit new rates was Family Care Health Plans, which had said it would charge $422 a month to cover a 40-year-old non-smoker in Portland, two and a half times as much as another insurer said it would charge for the exact same policy.
Another insurance company, Providence Health Plan, said that, oops, it had made a mistake in its cost projections and would reduce its planned rates by 15 percent. A spokesman for Family Care blamed its sky-high rates on overly pessimistic underwriters and said that, upon reflection (and after seeing what competitors planned to charge) it would cut its rates even more than 15 percent.
For years, insurance companies have been able to charge essentially whatever they wanted because there has been no organized marketplace for individuals and small business and no requirement that insurers provide information in a way that would enable us to make truly informed decisions. One of the most popular provisions of Obamacare changes that by requiring insurance carriers to provide plan descriptions in a standardized format and in language we can understand. They also have to tell us how much our monthly premiums will be and provide examples of how much we’ll have to pay out of our own pockets if we get sick—or pregnant.
Obamacare critics have charged that the rates insurers will be charging on the exchanges will be much higher than what insurers charge today because of other consumer protections in the law, such as the one that makes it unlawful for insurance companies to refuse to sell someone a policy because of a pre-existing condition.
While it’s possible that some people will have to pay more —especially those with low-benefit, high-deductible plans that are soon to be abolished—most folks who have to buy coverage without an employer’s help will likely pay less, thanks to income-based tax credits that will be available for the first time. As the Oregonian noted, at least half the people who buy coverage on the state’s exchange will qualify for a tax credit. And they’ll be able to determine quickly how much the tax credit will reduce their premiums simply by providing income information on the exchange website.
Americans in every state can look forward to these GOP-inspired consumer benefits and protections and the very real possibility of lower premiums, assuming Obamacare goes forward. Which, of course, it won’t if House Republicans’ 40th attempt to repeal Obamacare does indeed prove to be the charm.
Wendell is a Senior Analyst at The Center for Public Integrity where this first appeared on 5/13/2013.