Health Reform Exchange Provisions 'Harmful,' SIIA Says

The legislation was introduced Wednesday by Sen. Max Baucus, D-Mont., chairman of the committee.

Under the provisions SIIA finds problems with, the government would create a marketplace, or exchange, where consumers would be able to compare and shop for insurance plans that meet new government specifications.

The bill would start by mandating that businesses with up to 50 employees be allowed to buy into the exchanges. States have the option of expanding that to businesses with 100 employees.

And under the bill, by 2022, the health insurance exchanges would be open to businesses of all sizes. Analysts say these provisions go further in creating an independent marketplace than any of the four other bills dealing with the issue introduced by Democrats so far this year.

In a letter to Sen. Baucus sent Thursday, Mr. Ferguson voices concern that provisions provide no firewall barring employees who are members of self-insured groups from seeking alternative insurance from the exchanges; open the exchanges to employers of all sizes; and provide subsidies only to plans associated with the exchanges.

Moreover, because self-insured, employer-sponsored health plans have access to important claims data, they can analyze and predict medical and cost trends, therefore reducing costs of coverage, Mr. Ferguson and Mr. Roberti contend.

"Employers who opt to purchase coverage through the exchange would no longer have access to this quality information and would not be able to target benefits that result in savings and cost-efficiencies," they said in their letter to Sen. Baucus.

"Essentially the data would be handed over to insurance companies that have no incentive to cut costs," they said.

Moreover, they argued that while self-insured plans are nonprofit entities established solely to provide an employee benefit, exchange-participating commercial plans would incentivize decisions by profits and would likely pass those margins on to the employer and/or plan beneficiaries.

"If you truly want to achieve significant cost savings through this plan you should promote self-insurance," Mr. Ferguson and Mr. Roberti said. "At a minimum, claims data should be available for all employers so they can analyze cost trends."

Regarding their concerns about the lack of a firewall for the proposed exchanges, they said that because the legislation contains no provision prohibiting employees with access to an employer-sponsored plan from leaving their employer's plan and opting for the exchange, employer plans would likely lose members.

"As a result, their negotiating power and all administrative costs would be spread between less beneficiaries–resulting in a higher cost of coverage for those remaining," Mr. Ferguson and Mr. Roberti said.

And, they noted that because employers of all sizes would eventually be allowed to purchase coverage through the proposed exchanges under the legislation, the exchanges would no longer be a "safety-net mechanism," as originally envisioned.

As a result, "the government-regulated and -backed exchanges will become the central source of health coverage for all–resulting in millions of Americans who today are in plans that are tailored to the needs and wants of plan beneficiaries, to be covered by plans without that flexibility," they said.