Oklahoma Policy Institute looks at health insurance exchanges

CapitolBeatOK Staff Report

Published 10-Feb-2011

New information on the Oklahoma Policy Institute’s blog looks at the Health Insurance Exchanges that are a key component of the Affordable Care Act, the new federal health care reform law.

OK Policy’s analyst Kate Richey defines the key components of the Exchanges, which will go into operation by 2014, and looks at the work underway to develop Oklahoma’s Exchange.

A sketch of the analysis sent to CapitolBeatOK today (February 10) concludes:

“Even as legal and political challenges have left the future course of health care reform implementation in question, Oklahoma, like most states, seems determined to press ahead with putting a health insurance Exchange in place.  In addition to the grants received and work being done on Exchanges by the Oklahoma Health Care Authority, Senator Bill Brown [a Broken Arrow Republican] has introduced Senate Bill 960, ‘to create a health insurance exchange to facilitate the purchase of individual and small group health coverage within the state.’”

The OK Policy sketch continues, “In large part, Oklahoma policymakers are motivated by the knowledge that if states do not create their own exchanges, the ACA enables the federal government to step in and run a non-compliant state’s Exchange for them. Oklahoma policymakers seem committed to retaining control over the important policy choices involved in designing and operating the exchanges – even if that means that the hostile rhetoric about the new law coming from some elected officials ends up at odds with the real and important implementation work that is underway at the administrative level.”

In the longer document posted at OK Policy’s blog, Richey says that one of the most important provisions in the “Affordable Care Act (ACT)” is the “requirement that states establish private insurance marketplaces, or Exchanges’, to sell plans to individuals and small groups in their state.”

Richey writes, “What is unique about these segments?  Well, consider how insurance works for a large group employer:  every employee is covered regardless of medical history and all employees pay roughly the same premiums.  This is possible, and perhaps more importantly profitable, because the risk of covering the sicker/costlier employees is offset by the ease of covering healthier/cheaper employees.

“Now consider how insurance works in the individual and small group market:  currently, when you shop for insurance for yourself, or a handful of employees, you pay a much higher premium and have fewer plan options.  Why?  The insurance company does not have that larger pool of people to spread out the risk that you or your employees will be the sick/costly type.  This is exactly the problem exchanges are designed to remedy.  Exchanges enable individual and small group consumers in a state to pool their buying power and create a marketplace to negotiate with insurers for higher quality lower cost coverage, just like a large employer.”

The full text of Richey’s post for OK Policy, a leading progressive think tank based in Tulsa, is here.

Note: Editor Patrick B. McGuigan contributed to this report.