Consumers deserve a better health insurance exchange

By Laura Etherton and Rick Bennett of Portland, Oregon. Laura is the health care advocate at Oregon State Public Interest Research Group (OSPIRG). She served as vice-chair of the Oregon Health Fund Board Finance Committee Exchange Workgroup in 2008, on the Oregon Health Authority Exchange Technical Advisory Committee in 2010, and currently serves on the Oregon Health Policy Board Exchange Consumer Advisory Committee.

Rick Bennett is the director of government relations at AARP-Oregon. He served as a member of the Oregon Health Policy Board's Medical Liability Task Force and has served on numerous advisory committees and work groups of the Department of Consumer & Business Services on insurance-related issues.

If designed well, Oregon’s Health Insurance Exchange could improve choices for quality affordable coverage. That’s the reason our organizations have been working for years as part of a broad statewide coalition to promote a strong exchange.

The bad news is that as it currently stands, the bill to establish an Oregon exchange (SB 99) fails to deliver. The “consumer health insurance exchange” (so described by Mr. Bonetto in his Blue Oregon post on Friday) has lost the support of Oregon’s mainstream consumer groups.

Here’s why:

Strike #1: At a time when consumers and small businesses can ill afford 20% rate hikes year after year, the bill fails to have the exchange negotiate for lower costs.

The bill actually prohibits the exchange from going out for bids and taking the best offers. Instead, the bill sets up a scheme where the exchange would have to take an equal number of offers from each insurer. It’s simple economics: If the seller knows you can’t say “no,” you’ve got no shot at getting a better price.

Strike #2: It lets the foxes into the henhouse by allowing insurance companies on the exchange board.

Let’s be clear. No matter what we do, we know that the public meetings of the exchange board will be thick with insurance company lobbyists. The hallways outside the meeting will be lousy with them. The exchange CEO and staff will doubtless be hounded by them and subjected to their “expertise.”

But put them on the board? The exchange is a purchasing strategy. The idea is to pool buying power and improve choices for those with little or no leverage on their own. Putting the seller on the purchasing board is ludicrous.

Strike #3: The bill even mangled the language necessary to stop board members from voting on issues where they have a clear conflict of interest.

According the bill’s definitions, guess who might be considered to have a conflict of interest? A business owner whose insurance rates went down due to action taken by the board. Guess who wouldn’t be considered to have a conflict of interest? Chair of a non-profit insurance company.

The Senate health committee rejected pro-consumers amendments to fix these problems, citing a deal made ahead of time. The bill now goes to the Senate floor, and may be voted on as early as today.

Here’s what’s next, and why we haven’t given up quite yet. If the bill passes the Senate, it next goes to the House Health Committee, where we hope it can be fixed by a bi-partisan team of lawmakers. All eyes will be on Oregon legislators to see if they side with consumers and small businesses, or with the insurance companies.

In speaking of a federally-established insurance exchange in his post, Mr. Bonetto said "We can do so much better than that." We agree -- Oregon can do better. But we can also do better than SB 99. For Oregon's families and small businesses facing soaring health care costs, we must do better!

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    This is a pretty good example of how much more weight corporate lobbyists have than the handful of groups like OSPIRG and citizen lobbyists have in the legislature. The problem is far worse at the federal level.

    For whatever its worth, our members are overwhelmingly supportive of legislation to better protect ratepayers and consumers from insurance companies, and that is true whether they identify as liberal, conservative, or anywhere in between. There is no downside, electorally speaking, for protecting Oregon consumers.

    I would encourage any member of the House health care committee who took the IPO nomination in 2010 to listen to OSPIRG's concerns and try to accommodate them in this legislation.

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    I couldn't have said it better!

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      "Kudos to Sen. Bonamici and Sen. Shields for speaking on the floor about the bill's flaws and calling on the House to strengthen the bill to protect consumers and small businesses."


      What are the chances of that happening?

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    listening to Dr Alan Bates, i believe a number of Senators think this is a good way to start. Bates certainly made clear he does not believe the exchange is where real savings will happen; that will be in changing how people use health care (being healthy, the direction Kitz wants to go) and in getting all people insured so we stop "insuring" people via the emergency room.

    that said, i cannot see for the life of me the value of blocking the exchange from negotiating. maybe it's beyond the scope of what's reasonable, given the number of plans to be included, but a, they expect citizens to wade thru that crap and 2, why say No before it's even been tried?

    hooray for Susan Bonamici & Jackie Dingfelder standing up for consumers.

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    This is a wonderful bunch of info on the ins exchange. It starts to bring me up to speed on the subject. I have extensive experience lobbying individual representatives and senators as a private citizen on HB2009 and HB 2116. If any such lobbying is needed on this matter, I can be available.

    I am very concerned about a board which is not clearly empowered to negotiate costs. I think we've had quite enough compromise with ins industry, though I understand how they might be able to either help get things going, or log-jam them. 503-622-0162

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    I think it's telling that the insurance companies are happy with this deal, but OSPIRG, AARP, several unions, the Main Street Alliance and many other small businesses and organizations are not.

    That's a red flag if there ever was one.

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    "If designed well, Oregon’s Health Insurance Exchange could improve choices for quality affordable coverage."

    This is an assumption OSPIRG & AARP apparently share with Mike Bonetto & is just as wrong here as there. The goals of "quality coverage"and "affordable coverage" in a private insurance market in the U.S. health system as currently constituted conflict. "Affordability" of coverage is achieved by reducing quality -- by limiting practices, procedures, or treatments covered, by raising deductibles astronomically, by making high co-pays or high percentage co-insurance. Nothing in the SB 99 exchange or the federal PPACA law stops that except whatever minimum "essential benefits" are defined, and creating affordability in premiums by raising other consumer costs (deductibles, co-pays, co-insurance) is explicitly encouraged and planned for. So negotiating premiums has limited effect.

    The exchange under PPACA is a market, not an entity forming organized risk pools. It would have to be something like the latter to have the kind of negotiating power OSPIRG and AARP want -- but that would take getting federal waivers that a) aren't available until 2017 while Oregon is required to have an exchange by 2014 and b) would require federal approval it might or might not get.

    SB 99 as passed without negotiating power is exactly what PPACA contemplates, a market that individuals and individual small businesses enter separately, with the theory that insurers will benefit from attracting more of them and thus will compete on price and terms to get them & their PPACA subsidies. If adverse selection cherry-picking is addressed it is through risk-adjustment that can be gamed.

    Exchanges do nothing at all to address underlying reasons why private insurance and health care costs are rising so fast, and may make the administrative cost piece worse.

    The governance point is a good one, and in addition to what is stated, allowing insurers in as part of the "health care sector" crowds out actual providers insofar as insurance reps are appointed to the two seats reserved for that "sector."

    Even if OSPIRG, AARP and allies get what they want from the House and the Senate agrees, and even if they got a public plan included in the exchange, which apparently has gone completely by the boards, none of that would solve the fundamental and irremediable flaws of the exchange concept, based as it is on expanding our health- and cost-inefficient, unsustainable private insurance methods of financing health care.

    What we really need is a universal risk pool: comprehensive benefits under a tax-funded public Improved Medicare for All (or state level equivalent) single payer plan.

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    I do not understand the purpose of state exchanges under the federal reform act. I know that if states don't adopt their own exchange they will be included in the federal exchange program, but I don't understand why it is bad for consumers to be included in the federal program. I get it that progressive states will create exchanges that offer enhanced coverage for women's health care, reproductive medicine, mental health issues, etc. But from the standpoint of "Joe Sixpack" looking for cheap medical insurance for his wife and kids, why is an Oregon (or Washington) exchange beneficial?

    Sorry if I am being stupid, but I really don't get it.

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