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Advisor Sally Pipes

Advisor Sally Pipes — LPA Foundation

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Private Insurance Exchanges Thrive While Obamacare’s Falter

April 20, 2015

The federal government is desperate for Americans to enroll in Obamacare’s exchanges. But most people have refused.

When the exchanges officially closed in February, the U.S. Treasury estimated that there were still some 6 million people who would have to pay the penalty established by Obamacare for going without insurance. So the White House re-opened the marketplaces for an extra six weeks to try to entice them.

According to the latest government data, just 36,000 people have taken advantage of the extension.

While these public exchanges stumble, private exchanges are thriving. They offer companies and patients access to high-quality care at reduced cost. Yet these private exchanges — like so much else that’s actually working in the private healthcare market — are at risk because of the heavy government hand of Obamacare.

Private exchanges benefit both employers and workers.

For starters, they free companies from the logistical burden of administering health plans.

Private exchanges also empower employees to take control of their health care. Shoppers can often choose from among multiple health plans. Insurers have to keep costs down — and quality up — to attract customers.

Companies typically provide their workers a fixed amount toward coverage. Employees then pick the plan that best meets their personal financial and health needs.

Private exchanges aren’t new. Companies like eHealth Insurance, GetInsured, and GoHealth, have successfully run online markets for years. By the time Obamacare opened its exchanges in 2013, these three companies already had a combined 32 years of experience.

In fact, when HealthCare.gov was floundering in 2013, eHealth offered to lend its expertise to the federal government. “We are ready to help you get this program back on track promptly,” said CEO Gary Lauer in a letter to the president. The government demurred.
Employers are moving in droves towards private exchanges.

In March, Starwood Hotels said it would shift its 26,500 employees to a private exchange run by Towers Watson. IBM and Time Warner have done the same for their retirees. Employees at Walgreens, Sears, and Darden Restaurants also shop for their coverage in private exchanges.

Private exchange enrollment has reached 6 million customers — twice last year’s figure. Consulting firm Accenture expects it to double again in 2016 and reach 40 million by 2018.
By contrast, the Congressional Budget Office has repeatedly reduced its enrollment projections for Obamacare.

In March 2011, the agency forecast that the law would enroll 34 million people by 2021. This January, the CBO updated that estimate to 27 million people by 2025. Two months later, it revised that number to 25 million.

Sign-ups in the government-run exchanges haven’t met expectations in large part because the marketplaces have been dysfunctional on top of higher than expected premiums and deductibles and fewer available hospitals.

Oregon and Nevada had to abandon their state-built exchanges after receiving a combined total of nearly $400 million in federal grants. Oregon has since joined HealthCare.gov. The Obama administration is threatening to take over Hawaii’s struggling exchange, which has already cost north of $200 million in taxpayer money. New York, Rhode Island, and California are also struggling to finance their exchanges. Maryland has shut down its exchange.

The federal HealthCare.gov isn’t doing much better in the 37 states where it operates. The website still struggles to send correct information on customers to insurance companies. Subsidies are not automated, which means insurers must manually fill out spreadsheets each month to receive payment.

One administration official recently told a congressional hearing that the website was only 60 percent complete. That’s despite a $2 billion infusion of taxpayer money over the past five years.

Obamacare’s SHOP exchanges have been even more troubled. The healthcare law created SHOP specifically to help small businesses secure affordable health insurance.

The Government Accountability Office reports that SHOP enrollment “has been significantly lower than expected.” In California, fewer than 2,000 businesses signed up. In Washington, just 72 firms have done so. The federal government, most likely to spare itself embarrassment, hasn’t even released sign-up data for its SHOP exchange, which is currently in operation in three dozen states.

Sign-ups are low largely because these exchanges aren’t offering the bargains the administration promised. The GAO concluded that premiums were generally the same whether small-business owners waded through their local SHOP or bought insurance on their own outside the exchanges.

These ill-conceived and overly expensive government exchanges could pose a serious threat to the far better functioning private exchange market.

Earlier this year, eHealth announced plans to lay off 100 employees in the face of competition from the taxpayer-financed Obamacare exchanges. The CEO cited “lower membership than we expected in our individual and family health insurance business.”
The best way to help Americans sign up for coverage is by repealing Obamacare — and replacing it with reforms that fortify the private healthcare marketplace. Private exchanges have proven they can deliver quality health care at affordable prices — if the federal government will let them.

This article originally appeared at Forbes.com.

Issue Categories : Health Care