Currently, the U.S. Congress is debating the option of offering health insurance exchanges to its citizens, as a part of the health care reform plan. Of the three proposed bills for healthcare reform, all of them include some sort of insurance exchange. While, seemingly helpful, this option is reminiscent of a similar effort made by the state of California, which failed in 2006, and officials are trying to learn from their mistakes.
For thirteen years, from 1993 to 2006, the California government allowed small businesses to buy health insurance from a government-run exchange. While it sounded like a great, inexpensive option, many companies with healthy workers decided to forgo the exchange, opting rather to buy even cheap health insurance directly from insurance providers.
This left the government exchange with a collection of workers who needed more health care, thus causing their rates to increase and forcing insurance providers to withdraw from the program. By 2005, only three insurance providers remained a part of the exchange. In 2006, one of the final three withdrew and the program was shut down.
To avoid a similar debacle, government officials are deciding to make regulations firmer. For example, employers and employees who qualify will be required to buy their coverage from the health insurance exchange. There will be no way around it, so employers cannot opt to buy insurance directly from a provider. This way, rates will stay low and everyone will benefit from an insurance exchange which, when properly implemented, can be a great solution to providing healthcare.