Law360 Speaks to Joel Ario on Crucial Elements for Insurance Exchanges

Law360 Speaks to Joel Ario on Crucial Elements for Insurance Exchanges

"Insurance Exchanges Won't Curb Costs Without Reforms: Study"

August 23, 2012 - Law360 interviewed Manatt's Joel Ario, a managing director with Manatt Health Solutions, on the lessons learned through examination of Swiss and Dutch health insurance exchanges.

As reported by Law360, a report recently published by the New England Journal of Medicine found that the insurance exchanges in the Netherlands and Switzerland are working well to expand coverage but have had negligible effect on the cost of care. The authors, who are from the Harvard School of Public Health, say it's partly because the countries haven't reformed their healthcare purchasing systems - the authors argue that payors must have the power to negotiate with providers for lower costs and better care, which will drive innovative payment and delivery models. Another crucial element is risk adjustment; without a disincentive, insurers will keep out the sick to lower their risk.

The authors claim that the U.S. healthcare law's insurance exchanges will fail to keep costs down unless insurers can use their leverage to drive down prices and the government can bar them from seeking out only healthy beneficiaries.

Both elements are crucial to bringing down spending growth, said Ario.

"Those lessons are both true. It illustrates that there is no panacea here," said Ario, who had not read the NEJM article but is the former director of the U.S. Department of Health and Human Services' Office of Health Insurance Exchanges.

Ario said the exchanges would give small group and individual plans the kind of leverage only currently enjoyed by large employers and government programs such as Medicare.

"If most of the market is disorganized, with only a few lead payors pushing for reform of the delivery system, then people in the system can say, 'I don't have to change my business for you,' " he said. With the exchanges, he said, you have "more parts of the market that are working together to say we're serious about bundled payments and new forms of accountability . . .  You want as much of the marketplace to be organized as possible to pull in the same direction."

As for risk adjustment, Ario noted that the Patient Protection and Affordable Care Act has provisions that require insurance companies that have better-than-average risk to make payments to those with worse-than-average risk. The move "neutralizes" the incentive for companies to seek out only healthy beneficiaries, he said.

Read the article here.



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