What is a health insurance exchange?


It’s official: health insurance exchanges are alive.
But what exactly is a health insurance exchange? Government officials often compare the exchanges
to online travel sites like Expedia or Orbitz. And having walked through some of the exchanges,
that’s a good comparison. It makes some sense. But given that many exchange websites
might not even be live for a few weeks, I find it helpful to make another
comparison, to picture a big box store, like the kinds that sell electronics or housewares. Except the exchanges sell health insurance. Like many stores, the exchanges don’t
actually produce the products they sell. They sell products made by someone else. In this case, insurance plans
created by insurance companies. The Affordable Care Act — or Obamacare — sets minimum requirements for insurance
plans that are sold on the exchanges. So if an insurer approaches the exchange with
a plan that doesn’t meet the requirements, the plan won’t get space on the exchange’s shelves. The plans that meet the requirements get
a rank — bronze, silver, gold, or platinum — based on their costs and benefits. The exchanges also make the costs and benefits of
the plan as clear and easy to understand as possible so customers can find the plan that’s right for them. The theory behind an exchange is really
the same idea behind a big box store, too: by offering producers — in this case
insurers — millions of customers, they can bring the costs of the products — health
care — down by creating an economy of scale. And like big box stores, exchanges are also meant
to bring a wider variety of products to consumers. The greater amount of choice is meant to increase
competition and drive prices down further. But the devil’s in the details, and there are, rightfully,
some concerns about the exchanges. Box stores that succeed are great at marketing, communicating to consumers
to understand what they want. That’s not something that’s
been common in health care. And think about the “showrooming effect” too, right?
You might go shopping for a big-screen TV, but that doesn’t guarantee you’ll be
ready to buy the first one you see. The exchanges are designed to be simple
to use, but there’s still a good chance that many Americans who log on will get dissuaded
by the process or prices that they see. Even if the exchanges become expert marketers, there are also concerns about how many
people will use exchanges to find coverage. If there aren’t enough, or if the mix of healthy
and non-healthy patients isn’t right, health care costs will go up. And even if the exchanges work as
intended, that will add millions of patients to an already resource-constrained system. Some people think that could result in price increases and decreased access to care. If you want to learn more about the exchanges,
and how the health care industry should respond, visit advisory.com/exchanges.

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