Differences between the Senate and House approach to health insurance exchanges

by Deborah Maggart

It’s a very exciting time to be a part of the health care world.

The U.S. Senate and House were in deep negotiations attempting to reform health care in America by reconciling their separate visions into a single bill and – just as reform was deemed imminent – a special election in Massachusetts complicated matters by ending the Democrats’ filibuster-proof “supermajority” and with it the possibility of strictly partisan reform. But has this really dashed all hope for health reform in the near future as many are predicting?

After all, Senator-elect Brown supported reforms as a state senator that mandated universal coverage and brought a statewide Health Insurance Exchange (HIE) to Massachusetts – and the President seems confident that reform will move forward.

Will health reform be tackled in a more piecemeal fashion, as several Democrats have suggested? Will Republicans have renewed influence in the debate over reform thus changing the direction of the health care overhaul? Will measures to control the cost of health care play a bigger role?

One proposal I find particularly interesting is the Health Insurance Exchange model already implemented in Massachusetts and laid out in both bills. HIEs are less controversial than many reform proposals (think “public option”) and would overhaul the way Americans buy health insurance.

I recently attended a discussion on the Senate and House HIE proposals hosted by The Commonwealth Fund and the Alliance for Health Reform and this is what I learned:

First, what is a Health Insurance Exchange (HIE) and what do we expect implementation to accomplish?

The House and Senate’s HIE proposals are part of an effort to reorganize the market for health insurance, lower barriers to obtaining health insurance and focus the competition between plans on value rather than risk avoidance. Providers in the HIEs would offer plans certified as meeting a minimum level of comprehensiveness and consumers would be subject to different levels of cost-sharing. In theory, a state or federal HIE would have a very large customer base and therefore more bargaining power than even the largest employers. The idea is to make it easier and cheaper to purchase health insurance and ensure universal coverage (or near universal) through a mandate.

Though the two Chambers’ approaches are similar, the points of departure are fascinating:

Difference 1:

· The House bill proposes to create one national HIE and the federal government would be responsible for creating it – though states could opt-out and create their own if they so choose.

· The Senate bill puts the responsibility of creating the HIEs on the states – each state must first enact state level insurance reforms mirroring federal legislation. If a state declines to do so or fails in doing so, HHS will then set up an HIE or contract with a nonprofit to do so. There is no federal funding for states to set up these HIEs– the states have to pay for it themselves.

Difference 2:

· The House bill requires all non-group health insurance coverage to be sold through the HIE – meaning that all plans must meet the minimum level of comprehensiveness required to participate in the HIE.

· The Senate bill allows a non-group market to exist outside of the HIE – policies outside of the HIEs wouldn’t have to meet all of the requirements of qualified plans sold within the HIEs.

Difference 3:

· The House bill gives the HIE more regulatory power over insurance plans and requires insurers to bid for participation and allows the HIE to negotiate the terms of participation.

· The Senate proposal does not require negotiation, but the Manager’s Amendment allows the HIE to “take into account” excessive or unjustified premiums in certifying plans to participate.

Other differences:

As you may know, the House bill also proposes a “public option” to be offered through the HIE that the Senate bill does not. The Senate bars undocumented workers from purchasing coverage through the HIEs while the House bill only bars them from receiving premium subsidies. (You may recall Senator Joe Wilson’s infamous outburst, “You lie!” addressing this point.) The Senate bill has stronger transparency and disclosure requirements and requires HIEs to rate health plans which the House proposal does not.

Both visions, and any compromise of the two, would significantly alter the market for health insurance. People currently enrolled in individual health plans, those currently insured through state-run high risk pools, small businesses, and the uninsured will especially need to be educated about the new marketplace including the different levels of coverage and cost-sharing, and penalties associated with inaction.

According to a Congressional Budget Office estimate, perhaps 26 million people would enroll in a plan through the HIE by the end of this decade. With that much movement in the market, HIE plans will need to market and advertise to consumers and small employers – and greater government involvement in the health insurance market will lead to more tightly regulated communications in the space. The virtual market for health insurance will mean that digital media will be particularly important in this effort.

It’s certainly a very exciting and interesting time to be in the world of health care communications.

Deborah Maggart is Senior Account Executive at TogoRun and blogs at Notes from the Trail, where this post originally appeared.

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