Tennessee Needs Its Own Health Insurance Exchange

Authored by: Dr. Manoj Jain and Dr. William H. Frist

The ball is in our court.

By "our court" we mean the state of Tennessee, and the ball is the Affordable Care Act, aka Obamacare, which has been volleyed at the federal level between Congress, the Supreme Court and the presidential election. Now the Tennessee governor and the General Assembly will decide on two critical questions that will shape health care for our state.

First, should Tennessee develop its own insurance exchange, and second, should Tennessee expand the Medicaid program with federal funding. First, we will address the question of exchanges.

A "One-Stop" Shop

A few days ago a friend, Willy, who has a modest income and underlying heart disease, called for some advice. "How do I choose which health insurance plan to get?" The answer is hard. Today, there are many products offering different health benefits with varying costs and no easy way to compare them. With Willy's pre-existing illness, insurers may even deny him coverage.

Soon, however, insurers will be barred from turning people down due to health conditions, and health insurance will become standardized through an exchange. Insurance also will become more accessible, especially for those earning less than about $90,000 (400 percent of the poverty level), who will get federal tax credits to lower the cost, while others will continue with their Medicare, employer-based or private health coverage.

An exchange is essentially a one-stop shop of health care plans that will be available online or on a toll-free call. Consumers can decide among different categories of health insurance called platinum, gold, silver and bronze, based on benefits categories. A bronze plan would cover 60 percent of the cost of the plan's benefits on average, while the platinum plan would cover 90 percent.

All plans will provide the same essential health benefits like hospitalizations and preventive and wellness services, which will be defined by the state under federal guidelines. Out-of-pocket and health savings account limits will vary among plans. In addition, exchanges will include a catastrophic plan for those who are younger than 30 years old and are exempt from the insurance mandate.

Exchanges will serve both individuals and small businesses with 100 or fewer employees. States can lower the 100 limit to 50 in the first few years, and pretty much every state is doing that. By 2017, if Tennessee chooses, larger businesses may be allowed to purchase insurance from the small business exchange.

State exchanges will have lots of authority. Though they will not be setting the insurance rates, they can bar an insurer from an exchange for raising its rates too high. The exchanges will also determine the eligibility of an individual, such as Willie, for purchasing insurance as well as how much premium support and tax credit he will receive to help him afford insurance, paid for by the federal government, based on his income. An exchange can be an active purchaser choosing plans with good rates or a clearinghouse, allowing in all qualified plans. Tennessee will need to choose which model it wants.

The option for Tennessee is not whether to have an exchange; it must do so under the new law. The option is whether Tennessee should craft its own exchange or default to the federal exchange.

We believe it is best for Tennessee to develop its own exchange because exchanges are an innovative, market-driven strategy, which foster competition, choice, cost-savings and quality among insurers. It leaves Tennessee in charge, and not the federal government.

The state in charge

Why would a Tennessee exchange be better than the federal exchange?

Traditionally, insurance regulation has been under the authority of the states and states have much more expertise than the federal government in this field. Exchanges also represent the federalist ideal of states as "laboratories for democracy" where states can design a model that takes into account their individual cultures, politics, economies, and demographics.

Utah has a conservative, small business focused exchange. Vermont is moving toward a liberal single-payer exchange, Green Mountain Care, offering care to all its residents. Tennessee's exchange, if we choose to have one, will likely be somewhere in between, and will merge well with our existing Medicaid plan, TennCare.

If Tennessee decides not to run an exchange then the federal government may play a larger role in determining the eligibility for TennCare and other state programs as well as Tennessee's insurance market regulation. Specifically, a federal exchange created by the Obama administration will likely have more regulations due to "one-size fits all" model. It may have less choice due to limited provider networks and it will possibly have higher costs due to expensive essential health benefit benchmark.

Deadlines, barriers

The shopping season for exchanges opens next October and coverage begins in January 2014, just when the individual insurance mandate kicks in. If the state elects to expand Medicaid under Obamacare next year, a significant number of Tennesseans will be on either Medicaid or the new exchange and many small businesses will be eligible.

So what is holding us back? The health reform law has become so politicized that many state Republican legislatures don't want to dirty their hands with a confusing new law that was written and passed in a partisan manner. Many point to a lack of clarity at the federal level, even on basic questions of structure and functionality. If the exchanges fail, these state legislators do not want to be held responsible.

On the other hand, state exchanges represent a distinctly American opportunity to improve our local communities with local ideas. With little time left it is important for all of us -- citizens, small businesses, health industry stakeholders, churches, large employers -- to voice our opinions about the exchanges. Should we punt or run with the ball?

Manoj Jain is a physician and writes regularly for The Washington Post.
William Frist is a heart transplant surgeon and former U.S. Senate Majority Leader.