Pennsylvania is moving towards running their own state based marketplace (SBM) for their individual market. They are launching this fall with coverage going live on 1/1/21.
ACA marketplaces can either be “clearinghouses” where the exchange just makes sure every plan offered meets minimum federal and local requirements or “active purchasers” where the exchange curates the choice list to achieve some state specific objectives. Healthcare.gov is a clearinghouse, while Covered California is a notable active purchaser. These two exchange models have very different objective functions and outcomes as shown by Krinn et al in a 2015 Health Affairs article. I reworked their Table 3 for clarity. The SBM-A(ctive purchasers) optimized for big spreads to benefit subsidized individuals.
The Pennsylvania marketplace will be an “active purchaser” model (slide 36).
Pennsylvania under Governor Wolf (D-PA) has been aggressive in optimizing Pennsylvania insurance markets to increase affordability for the subsidized population. Pennsylvania aggressively pushed for Silverloading and Silver Switching. However there are limits as to what the state can do when it was on Healthcare.gov. Some insurers, most notably my former employer, UPMC Health Plan, offered many mirror image silver plans that crushed the premium spreads in counties that could have supported a big gap strategy.
Healthcare.gov’s operational staff could not care about that strategy as long as the plans that got loaded met state and federal regulatory requirements. An active purchaser exchange may be able to care about that strategy in monopoly markets. The exchange wishes to maximize competition in order to drive down gross premiums even at the cost of driving up subsidized net premiums, but in regions where there is little to no competition, active management can improve the well being of everyone involved without trade-offs.
As more states move to their own exchanges, we should expect to see states to make different choices as to who they prioritize and how they do so. The choice to move to an active purchaser model opens up a continuum of possibilities and it will be up to Pennsylvania and other SBM states as to how they use the expanded toolbox.
Ohio Mom
Ang
Why do I get the feeling that the active purchaser model could be a double-edged blade? PA may be using it to increase affordability for the folks who need it – but I have to wonder how much damage could be done by an administration with other priorities? Gotta keep those campaign donors happy while blaming it all on the so-called ‘lazy poor’. Young bucks and T-bone steaks! Bootstraps and learning the value of hard work! Plus they can claim that all the problems are because of Obamacare.
How much potential for abuse is there?
David Anderson
@Ang: Not much damage for the subsidized population given the way that the subsidies are structured and the fact that the active management exchanges are Blue State models
Ang
@David Anderson: Good to hear, I just worry about how these tools can be used for bad rather than good – waivers especially.
jonas
Query to Dave: So up here in NY, the governor and legislature are facing down a multi-billion dollar budget deficit that is being largely blamed on ballooning Medicaid costs and now the naysayers are going “See? We told you Obamacare and Medicaid expansion were budgetary time bombs! Neener neener!” Meanwhile, California is running multi-billion dollar surpluses. Medicaid accounts for about 1/3 of the budget in both states.
Maybe you’ve written recently on this and I missed it, but what has been the overall budget impact in states that adopted the ACA/Medicaid expansion? Are they having buyer’s remorse as the initial phase of federal support is drawn down, or has it produced any important savings and efficiencies above and beyond just getting working-class and poorer people access to some health care?
Brad F
David
In a county with only one MCO offering coverage (no competition), how does an actively managed exchange leverage its power to facilitate change? By that I mean, if they cannot temp MCO #2 into the region to offer competition to #1, short of changing the rules, how does the state create a milieu more favorable for the purchaser?
Brad