How health care exchanges would work

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KAI RYSSDAL: If Congress does eventually approves some kind of health-care overhaul, virtually everyone is going to have to buy insurance or pay a fine. Most Americans already get health insurance through their jobs. So they'll be OK. Those who don't have coverage, though, will have to buy it on the open market -- where insurance can cost a small fortune, if they can get it at all.

Under the bills that are making their way through Congress people who don't get insurance through work would be allowed to shop in what are called health insurance exchanges. Basically, government-regulated markets for insurance policies. Today, as part of "The Cure," our ongoing coverage of the health-care overhaul, we take a closer look at those exchanges.

Here's Joel Rose:


JOEL ROSE: To understand how insurance exchanges are supposed to work, let's start with the only state that already has one: Massachusetts.

Ada May Roberts runs a bed and breakfast in an old Victorian house in Salem.

Ada May Roberts: Hi! Did you find the parking OK?

Roberts is in her late 50s, and she's pretty healthy. No cancer, no diabetes. But as she's gotten older, her health insurance premiums have been rising, sometimes by thousands of dollars a year. So when Massachusetts' health insurance exchange came online three years ago, she was eager to see how it works.

Roberts: So you go on the Web site, you put in your ZIP code and also your birth date. And out pop 22 different policies that you can pick from.

Those policies are rated bronze, silver and gold, depending on how much coverage they offer. Roberts chose a silver plan with a high deductible, but much lower premiums than she was paying before.

Roberts: It's really helped. It's not just the money. It is the access and the choices that you have.

In most states, this is not how choosing an insurance policy works. There are plenty of plans out there, but no single place to look at all of them. And they're loaded with loopholes and limitations, so it's hard to compare one plan with another.

KAREN POLLITZ: Today, apples to apples, forget it. It's like apples to rocks.

Karen Pollitz studies insurance policies at Georgetown University.

Pollitz: There's stuff that is really good coverage, and there's stuff that is just absolute junk and everything in between. And it's very, very hard for consumers to see the difference, understand the difference.

Insurance exchanges are designed to change that. Under the health care bills now being debated in Congress, each state would have its own exchange, which would offer lots of different insurance plans with clearly defined costs and benefits. If there's going to be a public option, this is where you would go to sign up for it.

MIT economist Jonathan Gruber helped design the exchange in Massachusetts.

Jonathan Gruber: It offers a convenient side-by-side comparison. And we think in that way promotes competition, because insurers know that people are going to be comparing them side-by-side against others.

Kind of like Travelocity for insurance plans. People who buy insurance through an exchange should also get a break on the price. That's because the exchange has thousands of members, which gives it the clout to negotiate with insurance companies for better terms.

That's how it works in Massachusetts. But if exchanges become part of the national health care overhaul, the insurance industry wants to limit that clout.

Robert Zirkelbach is a spokesman for America's Health Insurance Plans:

Robert Zirkelbach: There is broad support among our industry for having a exchange-type model that's going to simplify choices. The issue is really this whole question of how much regulatory authority do you give the exchange, or the entity that's overseeing the exchange.

This is just one of several big issues that still have to be worked out. Another is exactly who is eligible to shop in the exchanges. In both the House and Senate bills, most people who can get insurance through their employers would have to take it. That would leave only about 22 million people nationwide in the exchanges.

MIT economist Jonathan Gruber says that's just a small slice of the overall insurance market.

Gruber: I guess I can't guarantee that that competitive effect will be large. But it clearly will be better than the sort of obfuscated market we have today, where people don't really know what they're shopping for.

Health insurance is mandatory in Massachusetts, and thousands of residents have bought theirs through the exchange. But it hasn't been a cure-all. Health care costs are still going up in Massachusetts, and insurance premiums are rising along with them.

I'm Joel Rose, for Marketplace.

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