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Redefining the Safety Net

Should California establish a Basic Health Program for certain low-income residents? CHCF's Marian Mulkey captures a recent policy conversation in a Health Affairs blog.

Accountable Care in Action

A new post on the Health Affairs blog details how CalPERS kept costs down in Sacramento through a "virtual" ACO with insurers and providers.

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Health Care Reform

Monday, August 09, 2010

Stakeholders Spar Over Power of Health Insurance Exchanges

Health insurance industry leaders and advocates are debating how much power California's forthcoming health insurance exchange should have to negotiate health plan rates, California Watch Blog reports.

The federal health reform law calls for the creation of regional health insurance exchanges to help consumers compare plans and purchase coverage.

Bills in Legislature

California lawmakers are considering two companion bills (AB 1602, SB 900) that would establish a health insurance exchange in California.

As currently written, the two bills would authorize the exchange to bargain with insurers. However, some insurance industry leaders say the exchange should offer options to consumers without negotiating rates.

Opposition to Bargaining Power

Anthem Blue Cross has suggested that providing the exchange with bargaining power could politicize the rate-setting process, which could drive insurers to withdraw from the market.

Charles Bacchi, vice president of the California Association of Health Plans, said small health insurance plans might be left out of the exchange if it has excessive negotiating power.

In addition, the Association of California Life and Health Insurance Companies said the bills might put insurers at a competitive disadvantage by compelling them to offer the same health plans within the exchange and outside the exchange.

Support for Powerful Exchanges

Anthony Wright, director of the advocacy group Health Access, said he supports an insurance exchange with strong bargaining power. He said authorizing the exchange to negotiate health plan rates would benefit consumers by curbing excessive rate hikes.

Next Steps

AB 1602 and SB 900 are scheduled to go before the Assembly and Senate appropriations committees, which need to approve the bills to authorize funding for staff to administer the exchange and support its website. The bills must be approved by the end of the legislative session on Aug. 31.

An adviser for Gov. Arnold Schwarzenegger (R) said the governor hopes to sign legislation to establish California's health insurance exchange before he leaves office in January (Jewett, California Watch Blog, 8/9).

Reader Comments:
  • 10
  • 08/10/2010
  • Robert Forster

I agree with James as barriers that are infrastructure based. Our insolvency will virtually make adequate subsidization of the exchange either impossible or inadequate and secondly, pent up demand for PCPs (like Ma) will overwhelm the entire system making access a problem in all segments-both public and private. No answer is coming forth as well re: PCPs since stakeholders are not willing to reform both the culture nor the financing of more PCPs.

  • 9
  • 08/10/2010
  • James Roache

Michael, It will be difficult for the exchanges to work. There are two fundamentals issues that need to be corrected first:
1. The State's ever-impending insolvency, and 2. The physician shortage. From CA Healthline July '10
"•California barely meets the nationally recognized standard for supply of primary care physicians. Only the Orange, Sacramento, and Greater Bay Area regions meet the recommended supply.
•Not all PCPs are accepting new patients, and just over half are accepting new Medi-Cal patients.
•Nearly 30% of physicians are over 60 years old — a higher percentage than any other state.
•While Latinos represent almost 40% of the population, only 5% of the state's physicians are Latinos, a fact that could have implications for language and cultural aspects of care.
•While family and general practitioner compensation has been rising, they earned only 88% of the national average in 2008."
Illegal immigrants still overrun the emergency departments and OB units.

  • 8
  • 08/10/2010
  • Michael R.

Robert,

Thank you for the reply and directing us to the white paper - which provides a good outline of the issues. Today I read an article on Kathleen Sebelius that asserts her department will be tasked to: create operating rules for state-run health exchanges. It will be interesting to see what degree of impact she will have in developing state-level insurance exchanges. I'm not sure if her role is one of just federal oversight and influence, or if her position also has some political teeth to force insurance change at the state level? At any rate, it seems that many of the health insurance related issues all draw back to the insurance company business model. It seems that states need to incentivize ($) insurance companies to operate differently, or try to marginalize their control over the market. Thoughts?

  • 7
  • 08/10/2010
  • Robert Forster

Michael: If you read CHCF's white paper on Lessons from California re: exchanges, it will give you the answer. For exchanges to be fiscally sound, they must serve a large # (millions) of clients and have exclusive access to them, i.e., the citizens are not eligible to obtain insurance in the private market. And though legislation, that is what Obama desires (yes, people will have to leave their plan and doctor in some cases) those needing subsidies will only be able to use the state run exchange. If this happens, the exchange has the opportunity to negotiate with payers who will manage these exchange plans for a better than private market price. That is the theory, but the savings are miniscule and are not what is inflating our premiums--it the cost and use and misuse of high cost technology in our society expected by both patients and physicians. Also , consolidation of the market (payers, providers) basically eliminating free enterprise as a driver of cost today as well. rob MD

  • 6
  • 08/09/2010
  • Michael R.

Drs. Jim and Rob:

You both seem well versed in the healthcare exchange issues and have offered many examples of how it will fail on many fronts. However, are you able to offer any examples on how health care costs and accessibility will improve in CA due to its implementation?



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