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June 2011 St@teside

Analyzing Active Purchasing for Exchanges

The Georgetown University Health Policy Institute and the National Academy of Social Insurance recently released a report— “Active Purchasing for Health Insurance Exchanges: An Analysis of Options”— that analyzes the potential of active purchasing as a strategy to improve the quality and affordability of insurance options in state-based exchanges. This new report takes a topic that has become quite polarizing in many states and provides a range of practical strategies for states to consider.

The findings of the report include:

  • The ACA requires several activities for health insurance exchanges that go beyond just being a passive clearinghouse for plan information.
  • The question of whether or not to utilize active purchasing often has been presented as an either-or option; either states block certain plans from participating in the exchange or they allow all applicants. The study contends that states have an array of options to improve the quality and affordability of coverage in the exchange, ranging from negotiation with plans on price and quality to strategies that leverage consumer choice through sophisticated decision-making tools.
  • States need to consider their environment. For states with only a few plans, it will be more difficult to aggressively negotiate with plans. States will also need to consider their outside market rules, which will impact the number of people in the exchange and what the exchange can do without risking adverse selection.
  • Being an active purchaser requires knowledgeable expertise as well as sophisticated data, which may not be available in all states.
  • Because rising insurance premiums are driven, in part, by underlying medical costs, the strongest potential for impacting the quality and affordability of plans may rest in an exchange’s ability to align purchasing strategies with other large purchasers.

A webinar that reviews the findings of the report is also available.