Exchange Will Do You Good

Two interesting items have been posted in recent weeks that perfectly capture the contrary motion of health reform implementation.  The first, found in the Washington Post, addresses the laggard’s pace many states are keeping in implementing provisions of health reform— in particular the health insurance exchanges that subsidize the purchase of private insurance by low and middle income citizens.  The controversial second, which appears this month in a McKinsey newsletter describes the incredible market pressures to do just that.

 For years, Washington wonks and informed political spectators have marveled at the left’s inability to tie the issue of health care coverage to the interests of small businesses, which politicians of both persuasions never miss an opportunity to refer to as “the engine of the American economy.”  Money that goes to high employee premiums does not go to creating jobs— at least, not for the small business in question.  The McKinsey article projects that 30% of employers will “definitely or probably” stop offering health insurance to employees after 2014 (the schedule date of exchange implementation) and that more than 50% of companies with a high awareness of the health care law will simply stop offering insurance and send employees to Exchanges.  Wowza.

There are a number of interesting things about this extraordinary (if it turns out to be true) change in coverage: first, the tremendous churn of beneficiary eligibility across subsidy levels just got more interesting, as a new class of pseudo employer-sponsored beneficiaries floods the market. Second, the risk pool changes.  Lastly, if you make your living selling small group business policies, it may be time to open that Ebay store because your job is a whole heck of a lot less secure beginning in 2014.  You’ll be in good company.  Many state Governors may find themselves in the same boat if they do not implement the exchanges in a timely manner, thereby depriving small businesses of the ability to make coverage the Government’s problem and find more productive uses of capital.  To do so gives the opposition party a golden talking point going into the 2012 elections.