Conservatives’ rejection of online insurance exchanges is perplexing

Like it or not, the Affordable Care Act is the law of the land. Both houses of Congress passed it. The Supreme Court upheld it. And the 2012 election confirmed it. The question is not whether the ACA will be implemented, but how well.

The response by conservatives to the health insurance exchange provision of the law has been perplexing, if not paradoxical.

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The ACA gives governors a clear choice: establish and run your own insurance exchange, tailored to your state’s unique circumstances, or cede that responsibility to the federal government. Remarkably, of the 26 states that have left it to Washington, nearly all are red states with conservative Republican governors. Among red states, only Utah, Kentucky, Nevada and Idaho are establishing state-based exchanges.

Why is this so baffling? Ideologically, conservatives should love insurance exchanges. They bring free-market forces to health insurance. They are online marketplaces that encourage private companies with diverse products to compete to win over customers. As Mississippi’s conservative Insurance Commissioner Mike Chaney put it, a state-run exchange “would be a free-market approach to solving some of the state’s insurance problems faced by small businesses.”

Practically, it was conservatives who advocated for the exchange model when Congress enacted President George W. Bush’s Medicare’s drug benefit. Under Part D, prescription drug plans must compete for enrollees by offering different combinations of formularies, co-payments and premiums. Paradoxically, many Republicans who supported Part D in 2003, including Govs. Sam Brownback and Nathan Deal, now oppose exchanges in their home states.

Most illogical is that when conservative, states’ rights governors turn down the opportunity to run a state exchange, they support expansion of the federal exchange.

Why the hostility to exchanges? Many cite unwritten regulations and unknown future costs. But if you are actually concerned about unwritten rules, why not take the opportunity to write them yourself? Moreover, the ACA provides federal funds to help defray the costs of establishing state exchanges. Once established, exchanges will be financially self-sustaining with little or no burden on taxpayers.

The real objection seems to be: (1) ObamaCare is bad; (2) exchanges are part of ObamaCare; therefore, (3) exchanges are bad.

What can we actually expect from the health insurance exchanges? First, market competition should lower premiums for consumers. The data from Medicare’s drug exchange is very encouraging. Costs have been approximately 30 percent below the Congressional Budget Office’s initial projections. Some of these savings are because of a decrease in the introduction of higher-priced brand-named drugs and a moderation in overall drug prices. But competition has led Medicare drug plans to adopt strategies to keep costs (and therefore premiums) down to attract more seniors. These changes include greater use of generics and soliciting rebates from drug manufacturers. At least in Part D, marketplace competition in an exchange has decreased costs.

Massachusetts offers another example of the benefits of exchanges. The Massachusetts exchange, called Connector, has about 230,000 people enrolled. The exchange has standardized insurance offerings at three coverage levels to facilitate comparisons. It provides a quality assessment seal. And, like other online shopping portals, it offers tools to help consumers choose among the available plans.

The result has been remarkable. In 2013, there are offerings from nine insurance carriers, and all have received the seal of approval. This provides consumers assurance that if they choose a cheaper plan, they are still getting a high-quality insurance policy.

Polls show high public support, with 62 percent of non-elderly adults and 70 percent of physicians in favor of the law that established the state insurance exchange. Other surveys show that most Connector enrollees are satisfied with their plan coverage, choice of doctors and the quality of their care.

Most importantly, the Connector controls costs. Unsurprisingly, most consumers have selected low-priced plans. Consequently, the average rate of growth that health insurance prices have seen during the first five years of the Massachusetts exchange was under 5 percent. That’s half the rate of growth in the private insurance market. Competition works.

Despite the best efforts of conservative governors, the exchanges will open for enrollment on Oct. 1, 2013, and coverage will begin on Jan. 1, 2014. Tens of millions of people will purchase insurance through an online exchange. Doubtless, the rollout will not be perfect. But with adjustments and refinements, we can expect smooth operations within a few years.

The ACA will bring about significant improvements to the U.S. healthcare system. Regardless of whether you are liberal or conservative, there is a lot to like in market-based approach of health insurance exchanges. This is not a government takeover of healthcare. This is not socialism. Conservatives would be wise to get on board.

Emanuel is a senior fellow at the Center for American Progress and vice provost at the University of Pennsylvania.