Making the Grade

A Scorecard for State Health Insurance Exchanges

When it comes to health care, there are few magic-bullet solutions for the many problems consumers face in the marketplace: insurers don’t compete for their business, leading to higher prices and lower quality. Important information about coverage is buried in the fine print, making it ha rd to know what’s really covered or which plan is right. And costs are continuing their unsustainable rise.   Yet there are policy solutions that can make a difference and give consumers a better deal on health care. One of the most important of these is the creation of new state-based health insurance marketplaces, called exchanges. These exchanges, authorized by 2010’s health reform law, offer the states the chance to address the win problems of cost and quality, and help consumers get a fair shake when buying insurance.  Exchanges give individuals and small businesses the same advantages that large businesses generally enjoy when it comes to buying health insurance. Large businesses have strong negotiating power, allowing them to get a lower rate for coverage as insurers compete for their business. They also benefit from economies of scale that lower administrative costs, and have sophisticated human resources departments and brokers at their disposal, making it easier for employees to understand their options and decide which plan is right for them.  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.  States thus have an important opportunity to improve their health care marketplaces through the creation of an exchange. And the health reform law gives the states substantial leeway to define critical aspects of the exchange, including who is eligible to buy coverage through it, how aggressively it will set standards and negotiate with insurers, and who will run it. A weak exchange 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. A strong exchange, though, can be just the tool states need to revolutionize their health care systems and improve quality while lowering costs. As of this writing, several states have already taken this opportunity and established their exchanges. But not all exchanges are created equal, and many states have yet to commit to establishing one. This report assesses the progress that the states have made, and for the states that have begun to set up their exchange, evaluates them on the myriad policies and criteria that will determine whether it is ultimately successful in improving health care for consumers.


Georgia PIRG Education Fund