Statement of Diane E. Brown, Executive Director, on Health Insurance Exchanges

Media Contacts

Before the Senate Committee on Health Care and Medical Liability Reform and the House Committee on Health and Human Services

Arizona PIRG

The Arizona Public Interest Research Group (Arizona PIRG) considers a strong health insurance exchange to be one of the most important measures Arizona can adopt and implement to ensure health care delivers higher quality and lower costs for consumers. 

With thoughtful design and effective implementation, a well-designed health insurance exchange can use its purchasing power to simplify consumers’ experience signing up for coverage; cut waste and boost efficiency in the insurance system; help control the underlying drivers of unnecessary costs in the health care delivery system; and free small businesses from the burden of administering health benefits.

Five key components of a strong health insurance exchange are as follows:

First, the exchange must be transparent, accountable, and responsive to consumers’ interests, not those of the insurance industry.  The exchange should have a strong mission statement focusing its efforts on delivering higher quality care and lower costs for consumers and small businesses.  Consumers and business representatives should have input into the exchange’s decisions, through appointments to decision-making bodies.  Conflict of interest and revolving-door policies should be adopted, to prevent industry representatives from majority control of the exchange.

Second, the more enrollees the exchange has, the more power it will have to negotiate lower rates, lower costs through economies of scale, and spread risk over a larger pool.  Arizona should operate an exchange for both individuals and small businesses, and open the exchange as soon as possible.

Third, the exchange should be an active purchaser, negotiating plans to ensure high quality coverage and low premiums.  By pushing insurers to adopt measures such as increased support of primary care, the exchange can be a powerful tool to leverage important improvements across the health care system.  In addition, the exchange must have the power to say no to low-performing insurers and refuse to list their products if they do not provide a good value to consumers. 

Fourth, the exchange should help consumers choose the plan that is right for them.  The exchange should offer a powerful, easy-to-use set of tools, including clear apples-to-apples price and benefit comparisons between plans, quality and cost ratings.  The exchange should also ensure there are a range of clear, distinct choices, rather than an endless, confusing array of products with slightly different benefits. 

Finally, the exchange must be stable.  Insurers may try to cherry-pick healthy people outside the exchange, which would drive up exchange premiums.  To prevent the exchange from being undermined, insurers should be required to offer the same products inside and outside the exchange, and use the same risk pool for both segments of the market.  Insurers should be prohibited from steering customers outside the exchange – and state decision makers should carefully monitor marketing efforts and the way broker commissions are set to prevent this from happening.

While these components highlight our recommendations, more detailed information on how to build a strong exchange can be found on our website.  In addition, it is important to note that the components outlined closely mirror the “Ingredients for Success and Affordability” distributed by Children’s Action Alliance and signed by over 30 organizations in Arizona. 

Lastly, Arizona PIRG supports our state setting up its own strong health insurance exchange.  We believe Arizona has the potential to successfully set-up and administer an exchange that meets the above criteria.  Policies, such as an exchange, where we put our own unique state stamp and as long as consumers are the priority trumps a one-size fits all approach from the federal government.