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Peter D. Rosenstein Headshot

The D.C. Council Should Amend Proposed Health Care Exchange Authority Legislation

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At the request of the D.C. Health Benefit Exchange Authority, the mayor sent a bill to the Council titled "The Better Prices, Better Quality, Better Choices for Health Coverage Amendment Act of 2013." It should read POTENTIALLY better.

I am unequivocally supportive of the Patient Protection and Affordable Care Act (ACA) and support the District of Columbia's plans to launch an insurance exchange which the federal government now refers to as a "marketplace." This exchange offers those who lack coverage the opportunity to purchase insurance and to take advantage of available federal subsidies. People can begin enrolling on October 1, 2013 for insurance plans that will take effect on January 1, 2014.

Legislation passed by the D.C. council in 2011 allows the District to build its own Exchange. My lingering concern is that approval of this amendment as is will close the District's private insurance market without any knowledge of how prepared the new Exchange is to function or even what insurance will be available on it.

The legislation amends the Health Benefit Exchange Authority Establishment Act of 2011 so that that individual health benefit plans with plan years beginning after January 1, 2014 shall be offered solely through the District's American Health Benefit Exchange, and small group health benefit plans for any small business without insurance as of December 31, 2013 shall be offered and issued solely through the District's American Health Benefit Exchange. It further states that on or after January 1, 2015, all small group health benefit plans of under 50 people that were in effect before December 31, 2013 shall be offered, issued or renewed solely through the District's American Health Benefit Exchange.

This eliminates the individual and small group private insurance market in the District of Columbia. While I have no problem with the concept the real problem is closing the private marketplace before the Exchange has proven effective.

We still don't know what insurance plans will be approved and offered through the D.C. American Health Benefit Exchange. If they approve this legislation, the council is acting in direct opposition to the intent of the ACA. Rather than fostering competition, it is reducing it. Other than Vermont, which will move toward a single-payer system, D.C. will be the only marketplace that will operate this way. In 49 other states, the exchanges or marketplaces will operate in competition with the private insurance market. The ACA empowers consumer choice and continued operation of a market outside the exchanges. Specifically, the law says:

Nothing in this title shall be construed to prohibit: (A) A health insurance issuer from offering outside of an Exchange a health plan to a qualified individual or qualified employer; and (B) A qualified individual from enrolling in, or a qualified employer from selecting for its employees, a health plan offered outside of an Exchange.

While many may eventually accept closing the private market, the council must recognize that once this is done, it will be nearly impossible to reopen it.

To ensure that individuals and small businesses aren't hurt, the council should delay the closing of the private marketplace by at least one year in each of the two instances identified. This extension will allow the D.C. American Health Benefit Exchange to work out its kinks and ensure that consumers who buy through the exchange have all the information they need to make appropriate choices.

The IT system the exchange will operate through is basically untested. On nearly every policy vote taken members of the Authority Board and Exchange, staff commented, "Yes, that would be good information to give to people buying insurance, but we can't get it on the IT system this year because of our deadlines. It will have to wait to be added at least until the system is running." This is not very encouraging to anyone forced to purchase their insurance the first year.

The board's meetings where votes are held are required to be public. But the board meeting during which a vote on this issue was taken WASN'T public. True, the teleconference meeting was duly announced as public. A number to dial-in and directions on how to participate in the meeting were provided. However, members of the public waited online and on the phone for 40 minutes because the exchange staff couldn't get the system to work. People were then informed the meeting had been held, a vote taken, and they could view the minutes online after they were posted. It may seem comical, but it isn't.

The second reason the councilmembers should look at this is political. Many will experience sticker shock when they see their next year's insurance bill. Costs will increase because policies must include the items in the Essential Benefits Package and because insurance companies expect more sick people to enroll. When that sticker shock hits, the council and the mayor will suffer the brunt of the anger, not the seven people voting on the Exchange Authority Board. I would suggest that the political implications will be less severe if the sharp rise in cost comes from the hands of private insurers rather than appearing to be only the result of the new exchange.

The premature dismantling of the existing insurance market in the District could create disruption for individuals and small employers. Many have signed a letter and testified, including the D.C. Chamber of Commerce and American Society of Association Executives< asking that the council not approve the amendment without making these changes. While some have raised concerns about the administrative costs of the new exchange it is easy to guarantee those costs are covered. A small fee could be charged for every policy sold in the District both on and off the exchange.

Reviewing other exchange-enabling legislation such as that passed in Maryland it is clear they see treating the exchange as a supplement to, not a replacement for, the existing market.

The council should stop the Exchange Authority from closing the private market until it has proven that it can function without glitches. As with any new system, that could take a couple of years. Let us begin the exchange without risking undue disruption to those who already have insurance and those who will have it for the first time after January 1, 2014. In addition the District must be cognizant that it competes with both Maryland and Virginia. If the council gets this wrong, there is a real chance that businesses may find it advantageous to move at least their corporate offices to Maryland or Virginia, and they won't come back. The Council should amend this bill and not 'put the 'cart before the horse' and possibly hurt people rather than help them.