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Health Insurance Exchanges – Will They Help Arizona Residents?

Health insurance exchanges will not be officially introduced until January 2014, but the insurance industry is already preparing for the changes they will bring.
Monday, 29 October 2012

arizona_health_insurance_exchangeIf you're already familiar with the various provisions of Obamacare, the concept of health insurance exchanges won't seem so foreign; but the average Arizona citizen only has a cursory understanding of the Affordable Care Act. Health insurance exchanges will not be officially introduced until January 2014, but the insurance industry is already preparing for the changes they will bring.

One of the more radical pieces of Obamacare legislation has always been the health insurance mandate. Health insurance exchanges, which allow people to purchase individual health plans at competitive prices, are designed to coincide with the implementation of the individual mandate. However, not everyone in Arizona is so crazy about the concept. A recent opinion piece in the Arizona Republic ("A Health-Insurance Exchange for Arizona Won't Help Residents," August 18, 2012) claims that setting up such an exchange in Arizona would impose job-killing fines on Arizona businesses while impacting the state's control over health insurance costs.

According to the article's author, Tom Jenney, state advocates of true healthcare freedom and reform would be wise to keep an eye on Governor Jan Brewer and her healthcare "czar" Don Hughes. Local opponents of the healthcare reform laws say that the state should not move forward with implementing this key piece of legislation; but that is exactly what Gov. Brewer is doing by setting up a health insurance exchange in Arizona. Proponents of the action approve of it now because the U.S. Supreme Court failed to strike down the individual mandate.

In the Arizona Republic article, Jenney suggests that the insurance market's use of the term "Arizona exchange" sounds like a state-based version of the federal program, implying it would give Arizona residents a consumer-friendly environment with more flexibility. However in reality, he argues, the Arizona exchange would not be consumer friendly, nor would it give Arizona much control over the policy. Despite the fact that the Supreme Court has deemed the penalty a "tax" instead of a fine, that doesn't change the law's impact on Arizona's small businesses, he says.

What will an Arizona health insurance exchange do to businesses?

Because an Arizona health insurance exchange would be governed by the Department of Health and Human Services, it would come with pages and pages of bureaucratic directives that would inhibit the free healthcare market that consumers currently enjoy. Not only will this limit insurance choices; it threatens to increase prices and impact the quality of care. Once the insurance exchange is established, Jenney argues, the governor will not be able to create a free-market alternative in Arizona. The article suggests that anytime a government bureaucracy partners with a free market enterprise it undermines consumer freedom.

How has Arizona handled government-run healthcare programs in the past?

Some Democrats in the state believe that all the rancorous discussion of Obamacare is nothing more than a typical Republican response. They say that the partisan bickering about burdensome mandates is fueled by the rejection of anything that sounds like "big government" and it is rooted in the a conservative power play. This may be true on a national level, but not in Arizona. Many Democrats may forget that Arizona was the last state to sign on to Medicaid in 1982. Back then, the resistance to a joint federal-state was similar to the conservative skepticism about Obamacare. They were justifiably afraid of how these burdensome mandates would impact the state's economy.

The Arizona Health Care Cost Containment System (AHCCCS) has become a bureaucratic nightmare for the state, costing hundreds of millions of dollars each year. As costs skyrocketed, state officials have fought with the Health and Human Services Department to change eligibility standards, yet Governor Brewer keeps echoing the lobbyists by telling citizens how "flexible" the exchange will be.

Is it possible for a health insurance exchange to be customer friendly?

Ideally, adding price transparency and competition to the mix would make an insurance exchange more customer-friendly, but Jenney contents that the insurance companies don't really want price transparency and competition. In fact, the insurance lobbyists in Arizona have defeated bills that would make the healthcare marketplace more transparent. By allowing Arizonans to shop in other states for coverage, lobbyists have also blocked reforms that would increase competitiveness within the state of Arizona.

What is the alternative to an Arizona health insurance exchange?

Thanks to some flaws in the drafting of the healthcare reform legislation, federal subsidies for employees cannot flow through a federally-run exchange. More importantly, businesses can only be fined by the federal government when employees are purchasing health plans through a state-based health insurance exchange. Consequently, jobs in Arizona could be saved if the state refused to create its own exchange because no fines would be imposed on businesses. Jenney's article urges Arizona legislators to fight for freedom and competition by pushing back against Brewer's proposed health insurance exchange.

Photo Courtesy of Phillip Capper / EveryStockPhoto.com

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