Pennsylvania Lawmakers Get a Lesson on Massachusetts' Health Insurance Exchange

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Emma Lowenberg, InternBy Emma Lowenberg, Intern

Members of the Pennsylvania House Insurance Committee heard from a national expert today on Massachusetts’ experience structuring a health insurance exchange.

States have until 2014 to create state-based health insurance exchanges that meet the criteria set forth in the Affordable Care Act. If they do not create a satisfactory exchange by then, the federal government will establish one for them.

While emphasizing that there is no “one size fits all” approach for states as they structure insurance exchanges, Dr. Jon Kingsdale said Pennsylvania can learn a thing or two from the Massachusetts experience.

Dr. Kingsdale, a veteran of the health insurance industry, was a key player in the establishment of Massachusetts' health insurance exchange.  Massachusetts established twin exchange programs in 2006 and 2009, and is now serving as a role model for other states.

At Thursday’s presentation, Dr. Kingsdale explained that the Massachusetts exchange includes an easy-to-navigate web site where shoppers can select their eligibility category (such as “family” or “young adult”) and then compare a range of plans from nine participating insurers. The site clearly lays out the prices, coverage and terms of each plan. Users can compare plans side by side in their own homes, eliminating the confusion of working directly with multiple insurance companies. 

The exchange is limited to the individual and small group markets, according to Dr. Kingsdale. About 40% of the 100,000 people in the individual market get their insurance through the exchange. 75% of exchange customers are in the subsidized programs, which include both Medicaid and a subsidized program for non-Medicaid eligible adults. 25% of customers are self-pay customers, and 85% of those get their insurance through the exchange website. Dr. Kingsdale said the average time to shop and purchase insurance on-line for this group is about 30 minutes.

For individuals (especially the young, single and low-income), the exchange makes the complicated process of comparing and purchasing health insurance straightforward and easily accessible.     

Since the implementation of health care reform in Massachusetts, the rate of uninsured Massachusetts residents has dropped from 10% to just 1.9% (the lowest rate in the nation), at a cost of $350 million, or about 1% of its $35 billion budget. Taxpayer filings indicate a 98.6% compliance rate with the individual mandate provision, and between 59% and 75% of voters approve of the exchange in recent polls. 

The exchange was opened to individuals in 2007 and to small businesses in 2009. It has saved small businesses an average of $400 per employee in annual insurance costs.

Operation of the exchange is funded by a small assessment on program premiums. The cost is very small and not borne by the state government. 

Essentially, Dr. Kingsdale said, establishing and operating a health insurance exchange can be a manageable process, provided it is begun early and planned carefully. 

Each state, of course, has unique populations and needs that make creating a health insurance exchange an individual project. While there is no “one size fits all approach,” Dr. Kingsdale said the experience of Massachusetts’ simple, cost-efficient, and accessible health exchange can provide Pennsylvania with an excellent role model as we work to structure our own exchange..

To date, two bills have been introduced in the Legislature — House Bill 627 and Senate Bill 940 — to create an insurance exchange in Pennsylvania. Both bills are currently in committee.

Emma Lowenberg served as a 2011 summer intern with the Keystone Research Center and Pennsylvania Budget and Policy Center.


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