Utah, a Model of a Health Exchange That Works

By David Clark

Years of experience has taught us that, when it comes to Congress, “We the people” should keep our expectations low. With the passage of federal health care reform, it seems those expectations have been soundly met. The Patient Protection and Affordable Care Act (PPACA) is, at best, seriously flawed legislation. That said, it has certainly brought health care to the forefront and now serves as an unprecedented opportunity to legitimately reform a fragmented and failing system.

One of the most sweeping elements of the law was the requirement that all states establish a statewide health insurance exchange by 2014. It further stipulates that if, by 2013, the U.S. Secretary of Health and Human Services (HHS) determines a state hasn’t made “sufficient progress” toward establishing an exchange, the feds will come in, take over, and default the state into the one-size-fits-all federal program.

State health insurance exchanges, as originally conceived, were supposed to serve as “farmers markets”–a centralized location where insurance carriers could come and display their wares and where consumers could make comparisons on based price and quality and then purchase the plan that best suited their individual or family circumstances. The authors of PPACA, however, bastardized the concept by making exchanges less competitive and more regulatory.

Currently, only two states have functioning exchanges–Massachusetts and Utah. The two models share a number of similarities, but also some distinct differences. In Utah, we began our path to reform with the notion that the invisible hand of the market, not the heavy hand of government was the best means whereby problems with the health care system could be addressed.

We began by establishing the defined contribution market and creating the Utah Health Exchange. Employers who participate in the defined contribution market give workers a specified dollar amount rather than a specified (or “defined”) benefit plan. Workers then use those dollars to shop in the exchange for a plan that best fits their needs.

This approach has the potential to unleash competitive forces by offering expanded choice while preserving pre-tax advantages for both the employer and employee. Furthermore, it introduces consumerism into the system by re-sensitizing patients to costs and giving them control over their personal medical expenditures. It should be noted that the Utah Health Exchange was not a regulatory entity, was not a new state agency, and did not require any mandates.

States, by design, serve as laboratories for innovative government solutions. There is no “one-size-fits-all” solution to the question of how best to reform the health care system; truth be told, there should be at least as many solutions as there are individual states.

The upcoming elections introduce a level of uncertainty with respect to health care reform. The strategy to “repeal and replace” does not seem viable. Although it seems inevitable that Republicans will make significant gains in Congress this November, no one is forecasting a veto-proof majority. States must have a second battle plan in mind – one more likely to succeed as this drama plays out. The new federal health care reform legislation includes a great deal of regulatory discretion and, since power abhors a vacuum, that void will necessarily be filled with either the collective states or with the federal government.

Unfortunately, states have historically underplayed their hand in Washington, their inaction resulting in them being acted upon. With respect to health care reform regulation, states should assert themselves and beat Washington to the punch. As the regulatory infrastructure for health care reform begins to take shape, states must be able to present tangible evidence of their willingness and ability to handle this responsibility. They must also be able to demonstrate that they can do so more effectively and efficiently than Washington.

Make no mistake about it, for anyone involved with the health care industry–including patients, doctors, hospitals, regulators, insurance carriers, and brokers–the world changed on March 23, 2010. From this point on, the effort to protect patient choice and preserve private health coverage will be a series of battles fought in the trenches of regulation. PPACA, if amended and corrected, has the potential to effectively elevate the efforts of states who dare to creatively advance in this most important effort–but only if we aggressively seize the opportunity.

Clark, a Republican, is Speaker of the House of the state of Utah.

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