Tomorrow, the D.C. Council has the opportunity to make the District of Columbia a national leader in making health insurance accessible and affordable to all its residents.
Mayor Vincent C. Gray and the D.C. Health Benefit Exchange Authority have proposed legislation setting up the District’s Exchange, as required by the federal Affordable Care Act. One key aspect of the proposal is that the Exchange would become the exclusive marketplace for individuals and small businesses seeking health insurance, beginning in 2015.
The unified market provision has been criticized by some in the insurance industry as a market disruption that will limit consumer choice. But as DC Appleseed and others recently testified to the Committee on Health, by making the Exchange the exclusive marketplace, the District can bring much-needed competition to the insurance market and give D.C. residents greater access to affordable healthcare.
The Exchange proposal
Under the legislation before the Council, insurers will be required to offer “meaningfully different” health plans through the Exchange. These plans must be offered at various levels—bronze, silver, and gold—depending on their cost. This structure is designed to make shopping for insurance easier and more transparent for consumers.
The legislation would also eventually make the Exchange the only marketplace for individuals and small businesses to buy insurance. This would be phased in, with individuals being required to purchase new plans through the Exchange beginning January 1, 2014, and small businesses being required to do the same beginning January 1, 2015. As Mayor Gray noted in his transmittal letter to the Council, creating “one large, competitive marketplace [will] provide individuals, small businesses, and their employees with the same clout as large companies” when buying insurance.
Criticism of the unified market
Opponents of the legislation have made two principal arguments.
The first is that making the Exchange the only market for individual and small group plans will “close markets.” Critics maintain that this will disrupt the market, reduce competition, and eliminate choice for individuals and small businesses seeking health insurance.
The opponents’ second argument is that the Exchange needs further testing once it is established, and therefore the Council should delay implementing the unified market provision. Opponents testified that the bill as proposed will exacerbate market disruptions that may occur when additional Affordable Care Act provisions begin taking effect in 2014.
Support for the unified market
As DC Appleseed testified to the Committee on Health, making the Exchange a single, transparent market that will fully inform consumers about all available health insurance plans is essential to achieving competition in the District. But right now, the District’s insurance market is plainly not competitive.
Instead, the largest health insurance company in the region—CareFirst—dominates the market, writing three out of every four plans for individuals and small businesses. This dominance has allowed CareFirst to charge higher rates than it could in a fully competitive market. And due to those higher rates, the company—chartered by Congress as a “charitable and benevolent” nonprofit—has more than doubled its surplus over the last decade to nearly $1 billion.
Under current D.C. law, CareFirst is prohibited from accumulating excessive surplus. The District’s Insurance Commissioner is now completing a review of that surplus. If the Commissioner finds it to be excessive, the law requires that the excess be spent down. CareFirst’s CEO has told the Commissioner that CareFirst would do this by reducing premiums and issuing refunds, since any excess would mean the company had overcharged subscribers.
Under the proposed new law establishing the Exchange, a competitive market place will prevent further excessive surplus from arising in the first place. The result will be that residents will have an opportunity to acquire coverage at the lowest possible cost—just as the Affordable Care Act intended.
The Council should adopt the Exchange proposal
The Council should adopt the Mayor and Exchange Authority’s proposal to bring competition to the marketplace. Opponents’ criticism doesn’t stand up to scrutiny, and their recommendations aren’t in the best interests of consumers.
In reality, the bill would do the opposite of “closing markets.” It will instead place the entire market on a competitive platform, with all insurers playing by the same rules, making it possible for consumers to understand and compare insurance products easily across the entire market.
Opponents are also wrong to urge the Council to delay implementing the unified market so that the Exchange can be “tested.” It’s impossible to legitimately test the effectiveness of a unified market if some plans are sold through the Exchange while others continue to be sold on another market. Such an approach would not only undermine the effectiveness of the Exchange but also make unfair any test of what it will be able to achieve.
Delaying the full establishment of a unified Exchange market will plainly harm consumers. The sooner a transparent, competitive market is established, the sooner residents will have access to more affordable insurance.
The Council should reject the calls to continue the status quo. Instead, it should act now to benefit consumers and make the District a model for how federal healthcare reform should work.