National- Why Aren’t State Exchanges Embracing Prudent Purchasing Strategies?

In the design of health insurance exchanges, one key issue is whether exchanges will offer improved value to people buying insurance in the individual and small group markets. A lot depends on whether the exchanges act as prudent purchasers – making design decisions that keep quality high and costs low. It appears that many states, however, are pursuing a different approach – one that allows virtually any licensed insurance carrier to participate and does not use effective purchasing strategies that are widely used by large employers. If this approach is used, we will have missed an opportunity to reduce costs and improve quality for exchange participants.

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Why are most state exchanges not pursuing a prudent purchaser strategy? One reason, of course, is that some health insurers and provider organizations have expressed opposition. These groups often have significant political influence, and they have been successful in some states in getting legislation that prohibits the exchanges from being active purchasers. There is, however, a deeper explanation for the fact that most state exchanges are not pursuing prudent purchaser strategies. In the exchanges, the premiums are paid by participating individuals and small employers, and the subsidies for low-income individuals are paid by the federal government.

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Shouldn’t something be done to encourage states to use prudent purchasing strategies? Surely it would be better for the exchange’s beneficiaries – individuals and small employers – if the exchange were able to offer lower costs and better quality. In addition, an exchange’s efforts to improve affordability and quality could be a catalyst for broader improvement throughout the health care system. From the federal government’s perspective, an exchange acting as a prudent purchaser would help to keep the cost of government subsidies lower.


http://healthaffairs.org/blog/2012/03/19/why-arent-state-exchanges-embracing-prudent-purchasing-strategies/
Hat Tip: Health Affairs, Health Affairs Blog, William Kramer