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European Insurance Exchanges - What the U.S can Learn

Come January 2014, individuals and small employers in the United States would start purchasing health plans from the state Exchanges. HHS has already issued its final “Blueprint for Approval of Affordable State-based and State Partnership Insurance Exchanges” describing the various options available to the states. 

All-round Optimism

CMS exudes confidence that competitive state Exchanges would be able to keep the prices low. It reasonably assumes that competition among private insurance plans, informed customers and small businesses enjoying the same purchasing power in Exchanges as large businesses, would trigger a fall in prices. The Congress Budget Office hopes that the competitive environment would help control administrative costs, reducing average premiums significantly. According to federal government agencies, “families who purchase private health insurance through exchanges beginning 2014 could save up to $2,300 on their healthcare each year. The average senior on Medicare will save $4,200 on their health care by 2021.” 

A Complex U.S. Insurance System

Unlike the European Exchanges particularly those in the Netherlands and Switzerland where insurance exchanges are part of healthcare reforms, the U.S. insurance system is more complex.  In the United State the idea of an insurance mandate is not liked by many Americans. Also, Health Insurance Exchanges (HIE) by definition requires the cooperation and coordination of several groups, factions and individuals within an organization. Therefore, it is important that the agenda of these groups are identified and addressed. The New England Journal of Medicine (NEJM) has highlighted a couple of ideas from the experience of the Netherlands and Switzerland which the U.S can pick up on its way to implementing the Insurance Exchange program.

The European Experience

“Both the Netherlands and Switzerland have recognized the fact that “competitive insurance markets will not help reduce costs without reforming the health care purchasing market.” If the regulated competition is to succeed, there has to be reforms in the purchasing market,” says the report. With innovative payment methods these two nations have been able to contain cost and improve quality.

The second issue concerns with risk-adjustment mechanisms. Adding prior hospitalization history and adjustments for patient medical conditions have yielded better results in care management in Switzerland. With its sophisticated formula, the Dutch have been able to discourage insurers from engaging in risk selection, according to the report. It shows the criticality of a good risk-adjustment method which the U.S can follow. Another important challenge is making people purchase health coverage by actually enforcing it.

Privacy and security is a major area of concern for HIE performance since data exchange requires permission and consent at different levels. Uncertainty about privacy can greatly impede an exchange network unless there is sufficient and explicit guidance. States should facilitate creation of a data system that includes meaningful performance indicators. The Dutch experience shows that with good data, there can be better solutions.

According to the NEJM study, implementation issues connected to the European Exchanges and the insurance market should not result in neglecting reforms in purchasing market. “Doing so risks further increase in health care expenditure, as has happened in the Netherlands and SwitzerlandPsychology Articles,” warns the report. And that is what the U.S should be more careful about.

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