Near-Universal Coverage Through Health Plan Competition: An Insurance Exchange Approach

Sara J. Singer, Alan M. Garber,and Alain C. Enthoven have designed a comprehensive, new approach for expanding access to health insurance. The proposal is built on the following key elements:

THE PLAN WOULD PROVIDE near-universal coverage by making private plans more affordable and helping low- and middle-income people buy coverage. This would be accomplished though tax credits and by creating “insurance exchanges” that would provide health insurance choices and promote competition among health plans.

INSURANCE EXCHANGES WOULD BE OPERATED by public or private entities or employers (for their own employees). Exchanges would offer individuals a choice of at least two health plans in every geographic region at community- rated premiums. The “U.S. Insurance Exchange”would be established to serve individuals and companies with fewer than 50 employees in areas where private exchanges do not emerge. Coverage purchased through exchanges would be exempt from state small-group reform laws and insurance mandates.

LOW- AND MIDDLE-INCOME AMERICANS who purchase insurance through an exchange would receive refundable tax credits valued at 70 percent of the median-cost plan. The credits would apply only for coverage purchased through the exchanges. Eligible low-income individuals who did not enroll in a health plan would be automatically enrolled in a federally funded default plan organized by the state. Other individuals would continue to exclude from taxable income their individual or employer-paid health insurance contributions, but a phased-in cap would limit this exclusion.

A NEW “INSURANCE EXCHANGE COMMISSION” would be created. It would be similar to the Securities and Exchange Commission—having authority to distribute tax credits and default payments, accredit insurance exchanges, risk-adjust premiums across insurance exchanges, and serve as an information clearinghouse for consumers.