Obamacare Premiums Higher in States with ‘Active Purchaser’ Exchanges

Sixteen states plus the District of Columbia chose to set up their own Obamacare exchanges, in which insurers offer subsidized health insurance to individuals. States had two ways to set up exchanges. Ten set up exchanges where the exchange itself was the “active purchaser,” meaning that it negotiated premiums, provider networks, and number and benefits of plans sold. Seven set their exchanges up as “clearinghouses”: Any insurer that met the regulatory standard was able to contend on the exchange.

The conceit behind the active purchasers was that the exchange could get a better deal for individuals than could individuals themselves. Well, the results for the first year are in: “Active purchaser” exchanges had premiums 13 percent to 20 percent higher than “clearinghouse” exchanges, according to research just published in Health Affairs.

The researchers found this conclusion robust after controlling for population health status, benefit design, and other factors.

This should put paid to the notion that the government has some kind of purchasing power, when acting for individuals, that we do not have on our own. We would never let the government buy our homes or cars for us. Nor should we allow the government to buy our health insurance for us.

Now that we know that the Obamacare exchange as “active purchaser” is debunked, it invites the question of why exchanges exist at all. If they are only to establish rules of fair play between consumers and insurers, states already have Insurance Commissioners to do that.

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For the pivotal alternative to Obamacare, please see the Independent Institute’s widely acclaimed book: Priceless: Curing the Healthcare Crisis, by John C. Goodman.

John R. Graham is a Senior Fellow at the Independent Institute.
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