Health Exchanges Move Foward

California late yesterday became the first state since health care reform was enacted to move forward with establishing an insurance exchange.

These exchanges will provide small businesses and individuals with one-stop-shopping for health insurance beginning in 2014. In theory, the exchanges should make insurance more affordable, because they will pool the purchasing power of small businesses and individuals and allow them to easily compare plans’ prices and value. Plus, the exchanges should attract more insurers into each state’s small group and individual insurance markets, since the web-based system will make it easier to reach these customers.

Governor Arnold Schwarzenegger, who signed legislation creating a five-person board to oversee California’s insurance exchange, said “it will be up to the states” to make health care reform work.

“The exchange will focus competition on price, quality and service—giving individuals and small business employees the same large-group purchasing advantages and more affordable options now enjoyed by those who work for large firms,” said Kim Belshe, secretary of the California Health and Human Services Agency.

Schwarzenegger’s decision to sign the bill was praised by John Arensmeyer, CEO of Small Business Majority, a California-based organization that supported health care reform.

The governor “set in motion the most crucial component of health care reform for small businesses—the insurance exchange,” he said. By acting quickly, the state will have adequate time to implement the exchange so that when it goes into effect in 2014, “California small business owners will finally receive the myriad benefits of a strong, robust exchange,” Arensmeyer said.

President Barack Obama also issued a statement praising California for leading the way on insurance exchanges.

“I look forward to continuing to work with and provide resources and support for all states as we work toward creating a new competitive health insurance system,” Obama said.

Yesterday the Department of Health and Human Services awarded nearly $49 million to help 48 states and Washington, D.C., establish health insurance exchanges. Grants totaling about $1 million will help each state plan their exchanges, including assessing information technology requirements and determining the rules for the exchanges.

Two states, Minnesota and Alaska, turned down the grants because their governors don’t want their states to help implement a law—health care reform—that they disagree with.

Plus, not all small business groups like the way California set up its exchange. The California Chamber of Commerce and the state branch of the National Federation of Independent Business think the legislation creating the exchange gives too much power to its politically appointed board.

For example, the board will have the authority to levy fees on the health insurance plans in the exchange. These costs will be passed on to the consumers who are covered by these plans, these groups fear.