The Pool is Open: California’s Active Purchaser Model Exchange

I keep getting asked what I think about the anticipated health exchange prices published by Covered California in this past week. After noting that Oregon, Washington, and other states also have some version of their anticipated exchange purchase premiums up for different markets, I tell people I am not surprised.

You see, California's numbers are coming from a state where health insurance is relatively robustly regulated on the state level.  Significantly, California's small employer market (the market whose expected premium data was released this week) already requires insurers to issue policies to all comers. The risk pool for California's small employer market already mirrors — to a certain extent — the characteristics of the post-ACA small employer market. 

Does this fact mean the failure of sticker shock to materialize is any less real? No. 

Does this fact mean that sticker shock (if that term includes premium increases prompted, in part, by a mandated increased richness of insurance products offered to a wider scope of insurance seekers) is not quite possibly still ahead elsewhere? No again.

Yes, I am looking at you Missouri.

I also note that the California's "active purchaser model" of exchange development may well have played a significant role here.  Insurers must compete to sell through the California exchange, unlike some states where all may sell in exchanges that are, essentially, clearinghouses.( Note that the federally facilitated exchanges will be open exchanges)

This means I also had the contrarian reaction to last week's announcement that United Health Care, Aetna, and Cigna are all sitting out the first round of Covered California sales in certain product markets. That is what it means to have an active purchaser model exchange in a state with a robustly state regulated insurance market — some insurers (in this case relatively small players in California's individual market) will choose to watch and learn from the sidelines before calculating whether they can play in the pool.  This is good news. If we can learn anything from California's past– the too rapid expansion of certain ill-conceived insurance products in the the 1990's followed by hasty market retreat at the price of considerable insurance market dislocation shortly thereafter — it is this:  that the announcement that the pool is open may not mean that everyone should jump in at once.