Interstate Health Insurance Compacts versus PPACA Exchanges on the Roadmap to Health Care Freedom in Wyoming
This paper provides a comparison between Interstate Health Insurance Compacts and the Insurance Exchanges authorized under the Patient Protection and Affordable Care Act. Last year, Wyoming enacted legislation authorizing the sale of Wyoming health insurance by out-of-state insurers through compacts, which are legal agreements between two or more states that, when approved by the U.S. Congress, have the power of federal law. Exchanges are online portals, run by a government agency or nonprofit entity, that match individuals with affordable health insurance plans. If states do not implement exchanges by 2014, the federal government is empowered to establish them within a state or region.
The insurance compact model would create larger markets through a move to individual purchase of private health plans. They would reconcile health insurance with other interstate offerings such as auto and property insurance, and would create larger risk pools and thus more offerings for both low - and high-risk individuals. Opening the market in this way will also create competition among insurers in these larger pools. The obstacles to compacts are the special interests seeking to prevent competition.
Though they may be run by states, exchanges will be under the authority of Health and Human Services, which will have the authority to determine minimum health insurance requirements and place strict limits on provider premiums. There are various uncertainties regarding implementation, including how to determine eligibility, how to verify eligibility, and how to integrate exchanges with other welfare programs. Most importantly, however, is the cost: exchanges are currently designed to provide Medicaid subsidies to families at 400% of the Federal Poverty Level, adding to an already financially unstable system.
Both Massachusetts and Utah have attempted to implement state-based exchanges, and neither have delivered on their goals to lower costs or increase the number of insured.