The Affordable Care Act and Designing the District of Columbia’s Health Benefits Exchange

Before the Health Committee of the District of Columbia Council, Alice Rivlin encourages the Committee to implement the health benefits exchanges of the Affordable Care Act in order to provide universal affordable health care coverage. Explaining that the District has passed tests regarding Medicare and Medicaid, Rivlin describes the District’s current health delivery system, explaining the landscape of health care carriers for groups and individuals and recommending that the health exchange become the sole venue for the purchase of individual and small business health insurance.

I am happy to testify on the bill before this Committee, “Better  Prices,  Better Quality, Better Choices for Health Coverage Amendment Act of 2013,” transmitted by Mayor Vincent C. Gray on behalf of the DC Health Benefit Exchange Authority. I strongly support the bill.

The federal Affordable Care Act (ACA), passed in 2010, is a major step toward an American health care system that covers almost everyone at sustainable cost. Implementation of the ACA is a long-sought opportunity to solve a disgraceful national problem—the fact that a large and growing share of the population cannot afford health insurance—as well as a chance to improve the quality and value of care delivered. As you know, the legislation was controversial at the national level, but the District welcomed it as an opportunity to realize our community’s goal of affordable health care coverage for all.

The District chose to comply with the ACA by creating its own health benefits exchange rather than letting the federal government do it. The District assembled a highly qualified Health Benefit Exchange Board, which recruited a strong professional staff and has implemented the ACA with energy and dispatch. Recently, the District’s exchange passed Phase Two testing with the Centers for Medicare and Medicaid Services. This indicates that the District is expected to be ready to enroll customers on October 1, 2013, and begin coverage on January 1, 2014. We should all be proud of the District for becoming a leader and role model in implementing the ACA, while some States have delayed and are behind schedule.

The exchange will require carriers to compete with one another by displaying qualified plans in transparent form in an electronic market place and allowing consumers to select the best plan for them. Some will receive federal income-tested subsidies to make plans more affordable. This is a win-win: DC residents will receive better health insurance at a lower cost and carriers will sell more insurance policies.

Designing the best exchange for the District has been challenging because DC’s health insurance market is small and highly concentrated. There are only four carriers one of which one controls more than three quarters of the individual and small group markets. The individual market is especially small—in part because of DC’s past success in reducing the number of uninsured residents through generous Medicaid eligibility and the creation of the Alliance. The individual market is estimated to fall below the 100,000 participants that the Urban Institute and others estimate to be the minimum size of the risk pool needed for an exchange to operate efficiently. In view of the small size and high concentration of the market, the DC Health Benefit Authority recommended, and the Council supported, merging the individual and small group markets after a transition period. Merging the markets recognizes that separate exchanges for the individual and small group markets would have too few carriers and too few enrollees to achieve the stability and efficiency that can be achieved in a merged market. 

Now the Council is considering whether to make the exchange the sole venue for the purchase of individual and small business health insurance in the District. We believe that this measure will maximize competition, transparency, and the insurance choices available to consumers. Conversely, retaining a separate market outside the exchange will reduce the risk pool below critical size and invite carriers to attempt to attract younger, healthier individuals and employer groups outside the exchange, leaving higher risks in the exchange. In a small market with a dominant insurer, it is essential that the exchange risk pool be as inclusive as possible, both to stabilize the exchange—which is the only source of federal subsidies for District residents with modest incomes—and to maximize transparency and competition.  

These design decisions are difficult, but, on balance, it seems wise to require that all DC individual and small business plans be purchased on the exchange with a single risk pool, to allow carriers to offer as many different plans as they want on the exchange, and to work hard to make the exchange as transparent and user friendly as possible. Moreover, the Board’s transition plan carefully balances the goal of full and speedy implementation with the needs of individuals and small business. The transition plan will allow small businesses to enter the health exchange over a two-year transition period, permitting small businesses to wait until the market settles should they feel the need.

Over the past couple of decades DC has gone from a city with a shamefully inadequate health system to a leader in provision of affordable health coverage and improving access to good quality care. We can all take pride in the steps DC has made to take advantage of the opportunity offered by the ACA to move to universal affordable coverage by acting quickly to implement it competently and expeditiously.

Thank you for the opportunity to speak today.