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PRESS RELEASE: New Analysis Outlines “Active Purchaser” Options for Health Insurance Exchanges

For Immediate Release: June 3, 2011

Contact: Jill Braunstein at (202) 452-8097

WASHINGTON, DC – States have more options than policymakers may realize to create health insurance exchanges that promote competitive and affordable insurance markets, according to a new white paper that addresses the issue of exchanges as “active purchasers.” Released today by the National Academy of Social Insurance and the Georgetown University Health Policy Institute, the paper notes the wide range of policies states can pursue, depending on local market conditions, to leverage higher quality, more affordable insurance for individuals and small businesses.

The paper, Active Purchasing for Health Insurance Exchanges: An Analysis of Options, by Sabrina Corlette and JoAnn Volk, research professors at the Georgetown University Health Policy Institute, is designed to assist states with the implementation of health insurance exchanges – a key element of the Patient Protection and Affordable Care Act (ACA).

“It shouldn’t be an either/or choice. States have a lot of flexibility in how they design their exchange and how they set their market rules to promote higher quality, more affordable coverage,” said Sabrina Corlette, co-author of the white paper. “Our analysis also shows that states will have to empower their exchange to take on a minimal level of ‘active purchasing’ in order to meet the ACA’s requirements and this includes the discretion to exclude a plan if it is not in the interest of enrollees.” The authors explore a wide range of policy options state may want to explore in empowering their exchanges to be active purchasers, from additional certification criteria to alignment with other state purchasers to selective contracting and price negotiation.

"There are also a number of environmental factors that could support – or undermine – active purchasing in the states,” said co-author JoAnn Volk. “These include factors such as market concentration, market rules, the number and health of status of exchange enrollees, and the exchanges’ ability to recruit and maintain a leadership and staff free from conflicts of interest and with requisite expertise.”

Health insurance exchanges are a critical component of the ACA’s provisions to expand access to coverage to millions of individuals. In addition to being a gateway for people to purchase subsidized health insurance, exchanges are expected to help organize insurance markets and promote more effective competition among health plans. There is, however, disagreement among policymakers over whether and how exchanges should be able to act on behalf of individual and small group buyers to demand higher quality products at more affordable prices. Some believe that exchanges should be empowered to selectively contract with carriers, set tougher participation criteria than the federal standards, and/or negotiate price discounts in order to effectively serve consumers, like the Massachusetts Connector. Others believe the best way to serve consumers is to have the exchange provide the broadest array of plans (a “Travelocity” approach). This white paper shows that exchanges do not have to do one or the other; there is a whole continuum of options.

This paper is a product of a NASI project funded by the Robert Wood Johnson Foundation to provide technical assistance to states developing health insurance exchanges. Other products include a toolkit offering legislative language for policymakers implementing their exchanges, and an issue brief on exchange governance. An issue brief on harmonizing the exchange and state Medicaid programs is forthcoming.

Contact Information
For more information about Active Purchasing for Health Insurance Exchanges: An Analysis of the Options, please contact Sabrina Corlette at sc732@georgetown.edu or JoAnn Volk at jcv28@georgetown.edu. For more information on NASI’s Health Insurance Exchange Study Panel, please contact Sabiha Zainulbhai, Health Policy Assistant at szainulbhai@nasi.org or Lee Goldberg, Health Policy Director at lgoldberg@nasi.org. Both can be reached by telephone at 202-452-8097.

Georgetown University’s Health Policy Institute (HPI) is a multidisciplinary group of faculty and staff dedicated to conducting research on key issues related to private health insurance regulation, market practices and product design, and implementation of insurance reforms that will expand access to affordable, adequate coverage.

The National Academy of Social Insurance is a nonprofit, nonpartisan organization made up of the nation's leading experts on social insurance. Its mission is to promote understanding of how social insurance contributes to economic security and a vibrant economy.

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