The Debate We Should be Having About Exchanges
There is this idea that Republicans are looking for any excuse to attack Obamacare, but that is not true. They are only interested in highlighting problems which reinforce their world view, so many of the most glaring shortcomings with the design of the Affordable Care Act have received little public debate.
A perfect example is this profoundly stupid idea of writing the ACA to have each state build their own exchange. Almost daily there is a reminder of why even going with a single national exchange would have been much better policy, but since the GOP doesn’t want to promote a large role for the federal government this gets little attention. The debates we actually need to have are not taking place.
Fourteen states plus D.C. tried to build their own exchanges for 2014. That is fifteen governments spending hundreds of millions each to build copies of the same basic idea. So far one state already has completely scrapped their expensive state-based exchange and switched to the federal one and at least two others are likely to soon join it. That would be a 20 percent failure rate.
In addition, running an independent exchange in a smaller state doesn’t seem to make financial sense. The D.C. exchange has a serious money problem. Since the pool is small, covering the D.C. exchange’s annual cost via fee on plans sold, as the law was intended to work, would require a massive 17 percent tax. That is just the overhead cost of a program to merely helping people select an insurer.
If we insist on using an expensive and complicated system to connect people with private insurers (which is an even bigger debate we need to have) the smart thing is to reduce redundancy and spread the operating cost of the system over as large a group as possible. That is one clear advantage of a single federal program.
We probably got lucky that so many governors and legislatures refused to build their own exchanges. There would likely have been more total failures similar to Oregon and a half dozen small states running into funding problems like D.C.
If we had a saner political climate Congress would respond to this reality by properly formalizing the role the federal government is already playing, giving the federal exchange a clear funding source, a dedicated bureau, management structure, and oversight. Additionally, a moratorium on any new state-based exchanges would make sense.
Unless they can prove a significant advantage we shouldn’t be handing states giant sacks of money to basically build something that already exists. Looking at enrollment data state-based exchanges on average didn’t actually do significantly better at meeting enrollment projections.