Reactions to OSPIRG Report on Insurance Exchange Mixed

November 22, 2011—Consumer groups are continuing to question whether the health insurance exchange – without the power to negotiate rates with insurance companies – can be effective, following the release of a report by OSPIRG, which gave the exchange a B- grade.  

Called “Making the Grade,” the report was released in late October and examined the insurance exchanges under way in 12 states, including Oregon. It argued that insurance exchanges should act as important and powerful consumer tools to allow individuals and small businesses to access and purchase affordable health insurance.

“Large businesses have strong negotiating power, allowing them to get a lower rate for coverage as insurers compete for their business,” the report said. “In much the same way, exchanges give individuals and small businesses the ability to band together and gain the same benefits of size, negotiating power, and information. By providing better options and better information, and negotiating on behalf of its enrollees, the exchange can level the playing field for consumers.”

Weak exchanges, according to the report, “could wind up taking its cues from the insurance industry, not consumers, and do little to shift the fundamental problems in most states’ health care markets.”

The report evaluated the various state exchanges on a variety of factors, including whether they were accountable and transparent to consumers, their ability to negotiate lower premiums and better health coverage, board makeup, and their financial stability.

Two weak points were identified in Oregon’s exchange: the inability to negotiate premium rates with insurance companies to achieve more affordable and better quality health coverage. And, the allowing the health insurance industry to have two seats on its board of directors, which could lead to a conflict of interest.

“I think it’s a pretty fair assessment,” said Janet Bauer, a policy analyst with the Oregon Center for Public Policy. “There are a number of ways in which the OSPIRG report shares our concerns.”

But Liz Baxter, who chairs the exchange board and is executive director of the health advocacy organization We Can Do Better, said the grading of Oregon’s exchange may be premature.

Since its creation, the board has only met four times and has just begun to discuss policy issues, she said.  

“I’m not sure that grading something before it starts is the best approach,” Baxter said, The exchange is expected to start offering health plans in the winter of 2013, and start covering individuals starting January 1, 2014.

Rocky King, the exchange’s executive director, agreed. “I don’t know how you can get a grade for something that doesn’t even exist yet.”

Yet, consumer groups are continuing to focus on whether the exchange will negotiate rates, premiums and other costs with insurance companies—which they say is the key to determining whether Oregon’s exchange will succeed.

“Some of the most stable exchanges have taken some role in active purchasing,” Bauer said.

Two exchanges that did -- in California and Texas -- failed and no longer exist. “Those are certainly examples we can learn from,” Bauer said.

Ron Williams, the executive director of the advocacy organization Oregon Action, agreed. “Buying power and the ability to use the number of individuals [in the exchange]…is key to accessibility and affordability and quality.”

Senate Bill 99, which set in motion the exchange, doesn’t prohibit the exchange from negotiating with insurance companies, and that option could still surface.

“It was a big priority of OSPIRG,” indicated Baxter, who said she was not speaking on behalf of the board. “The notion that, somehow, the exchange was going to be in a negotiation position became a message and a talking point during the [legislative] session that not everyone agreed was the right frame to be using.”

She thinks the exchange can use other tools to lower prices and make insurance more affordable such as requiring certain criteria that insurance companies must meet -- patient-centered medical homes are just one example.

“The exchange can interact with health plans and impact coverage options,” Baxter said. “It’s not just about getting something [people] will purchase, but making sure that what they purchase is something we believe will get people to better health.”

Bauer agrees with Baxter that “setting some criteria…for evaluating the integrity and potential benefits for consumers” could be an importance piece of the exchange.

Williams thinks the exchange board shouldn’t steer away from negotiating with insurance companies. “Negotiating power is bigger and stronger” than other tools to lower prices, he said.

Currently no one from the insurance industry sits on the exchange board, and Williams said,  “[They] have a direct financial interest in the decisions of the board.”  

A similar conflict doesn’t exist for small business owners, he added. “The financial incentive is more altruistic, though, in ensuring that [affordable insurance] is available to them to benefit their employees. It benefits the employees and the employees’ family. It’s not just about their bottom line.”