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National Health Insurance Exchange

One of the center pieces of the Obama health platform during his campaign was the National Health Insurance Exchange.  Many people are curious about what the National Health Insurance Exchange is and what that might mean to them on a personal level.

The idea behind the National Health Insurance Exchange is to provide an area where anyone that wants new health insurance has options to enroll in a new public plan modeled after the Federal Employees Health Benefits Program (FEHBP) or an approved private plan that may be subsidized via tax credits based upon their income level.

The National Health Insurance Exchange qualifying plans would not exclude based upon pre-existing conditions.  It would provide a basic level of essential coverage including preventive, maternity and mental health care. As a central authority, the National Health Insurance Exchange would monitor rates and rate increases charged by participating private health insurance carriers.

Providers (i.e. doctors) and hospitals that participate in the new public plan will be required to collect and report data to ensure that standards for health care quality, health information technology and administration are being met.  That implies that policy holder benefits will be limited to services from participating public plan providers. 

The success of this plan seems to hinge on:

  1. The ability of the government to run their program more efficiently than private insurers, whose profits average 3%. The government’s experience running the Medicare program demonstrates this may be a serious challenge.
  2. Pricing the program low enough to attract more than the uninsurable, which in time would cause the program to turn into a giant high risk pool that would require heavy government subsidies in order to sustain the program.
  3. Demonstrate that tax credits will be a sufficient “carrot” to draw lower wage earning Americans into the program.  For people living paycheck to paycheck the promise of a future tax credit would not be as appealing as a direct cost reduction to their monthly premiums.
  4. Without a government mandate on health insurance coverage for all, and substantial penalties for non-compliance, non-participating private insurance plans will attract healthier customers and have lower utilization costs, threatening the federal program’s long term cost competitiveness and likely result in ever escalating government subsidies for keep the program afloat.

Without addressing health services cost drivers first, if the core plan benefits are too rich and comprehensive the program’s premiums will be too expensive without heavy government spending to subsidize the program.  A better option might be to offer a core plan with basic coverage and then allow the private insurance industry to market supplemental plans that people could shop from and purchase on an ala carte basis, as they do with Medicare Supplemental plans.

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